Early is not simply about quitting work at a particular age. Financially, it means reaching a point where your investments can support your lifestyle without depending on a regular salary.
That makes early retirement a more demanding goal than conventional retirement planning. Someone retiring at 45 could potentially need to fund four decades or more of expenses, while having fewer working years to build the required corpus.
“Age is the wrong unit. Financially, early retirement is the point at which your portfolio can fund your expenses for the rest of your life without you adding to it,” said Sandeep Jethwani, co-founder, Dezerv.
The size of the corpus depends not just on income but also on how much of that income is saved and invested. Jethwani said someone earning ₹2 lakh a month and saving half of it consistently for 22–25 years could potentially reach a workable number. In contrast, someone earning ₹5 lakh but saving only 15% may struggle if their lifestyle expenses continue to rise.
Rahul Jain, president and head, Nuvama Wealth, similarly said a strong savings rate, disciplined investing and avoiding lifestyle inflation can be more important than having an exceptionally high income.
Sanjiv Bajaj, joint chairman and managing director, BajajCapital Ltd, said early retirement does not necessarily mean never working again. For many people, it can mean reaching a stage where investments support their lifestyle and work becomes a choice rather than a financial necessity.
Keep equity allocation high when retirement is 15–20 years away
For investors who have 15–20 years before retirement, experts broadly favour a high allocation to equities because the longer horizon gives investors more time to absorb short-term market volatility.
Jethwani said an allocation of around 75–80% to equity, with the balance in short-duration debt and a small liquid buffer, could be an illustrative starting point. He stressed that the appropriate allocation depends on an investor’s existing corpus, dependents and ability to withstand a 30% market decline without selling.
Jain and Bajaj also suggested that investors with a 15–20 year horizon could broadly consider around 70–80% equity, depending on their risk appetite and financial circumstances.
Debt still has an important role because it provides stability and can help investors remain invested in equities during market downturns.
The allocation should also evolve as retirement approaches. Bajaj said investors should gradually increase their allocation to debt and relatively stable instruments, particularly within five to seven years of retirement, to reduce the impact of market volatility close to the time the money is needed.
Diversify equity exposure without overloading the portfolio
The equity portion can include different mutual fund categories, but experts caution against chasing every available category.
Jain said a diversified portfolio could combine large-cap, mid-cap and small-cap funds. Large-cap funds can provide a relatively stable foundation, while mid-cap and small-cap exposure can add long-term return potential. However, these segments also come with greater volatility and deeper drawdowns.
Bajaj said investors could consider a combination of index, large-cap and flexi-cap funds depending on their risk profile and overall portfolio.
“Holding eight or ten funds doesn’t necessarily make a portfolio better if there is significant overlap between them,” Bajaj said.
Investors should therefore look at the underlying holdings rather than simply counting the number of mutual fund schemes they own.
Calculate your retirement corpus using future expenses
Choosing mutual funds is only one part of early-retirement planning. Investors first need to estimate how much they will actually need to maintain their lifestyle after they stop earning.
Using today’s expenses without accounting for inflation can lead to an inadequate retirement target, particularly when the portfolio may need to last 30–40 years.
Bajaj said investors can build a disciplined equity-debt portfolio and still fall short if their retirement calculation does not adequately account for inflation and healthcare costs over a long retirement.
Healthcare deserves particular attention because a major medical event can create a significant unexpected expense and potentially force an investor to liquidate long-term investments at an unfavourable time.
Jethwani also cautioned that affluent households may experience spending inflation that differs from headline consumer inflation because their consumption patterns and lifestyle expenses can rise faster.
Investors should therefore estimate future expenses based on the lifestyle they expect to maintain rather than simply applying a generic retirement formula.
A separate emergency reserve and adequate health insurance can also help prevent unexpected expenses from eating into the retirement corpus.
Other assets such as EPF, , NPS, bank deposits and real estate should also be considered while calculating the overall retirement corpus. The entire retirement requirement does not necessarily have to come from mutual funds.
Review the portfolio and increase SIPs as income rises
Building an early-retirement portfolio is not a one-time exercise. It needs to evolve as income, expenses, risk tolerance and the retirement timeline change.
Jethwani said one of the biggest mistakes investors make is setting up SIPs and then treating the portfolio as finished.
One problem is allocation drift. If an investor starts with a 70:30 equity-debt portfolio and equities perform strongly for several years, the portfolio can gradually become much more equity-heavy without the investor consciously deciding to take additional risk.
Jethwani said investors should distinguish between reviewing a portfolio and churning it. Rebalancing can have tax implications, so investors should assess whether the change in allocation justifies the cost. For most investors, he said, reviewing the portfolio twice a year should be sufficient.
The SIP amount should also rise as income increases. If an investor’s salary doubles over several years but the remains unchanged, the proportion of income being invested can fall significantly.
Ultimately, early retirement planning is not about finding a single best mutual fund. It requires a high savings rate, a diversified portfolio, disciplined investing and a gradual reduction in risk as retirement approaches.
The objective is to build a corpus that can support financial independence for decades, rather than simply accumulating the largest possible amount of money.