Story of Four friends and their approach to retirement planning

Story of Four friends and their approach to retirement planning

Four besties post-graduated from a College in 2003. They all bonded over life, travel, career and hopes of early retirement. So, when they graduated, they pledged to meet after 20 years. 

When they reunited in 2023, they discussed their career and retirement plans.

Anshu – The saver

From the very beginning, Anshu has been saving money in a Fixed Deposit or Savings Account. As a habit, every few quarters, when a sizeable amount is accumulated in Bank account, she would transfer the money to FD and would renew it on maturity.

However, over the past 20 years, her investments could not beat inflation, she missed out on opportunity to grow wealth.

Anshu was earning a modest salary with average increment (linked to inflation) every year, she could meet out her needs but far away from retiring early.

Anshu’s reluctance to take risk was the main reason for her inability to retire early.

Nitin – The risk taker

From the very beginning, Nitin was a risk taker and always dreamt of retiring early. He too was earning a modest salary with limited increment (linked to inflation) every year.

In order to make up for the inadequate savings, Nitin would trade in the stock market with an aim to make a few ‘extra bucks’. He would rely on media news, friends and social media for his investments. He made some ‘quick money’ until losing big in the “crypto-mania” taking away a big portion of his assets. As a result, he is nowhere near his goal of early retirement.

Though, in his early days, luck favored him and he made some quick money in stocks which led him to take bigger and bigger risks.

Nitin’s willingness to take uncalculated risk or investing without adequate research prevented him from an early retirement.

Gurvinder – The Highflier

From the very beginning, Gurvinder was self-driven, goal oriented, focused on his career and everyone thought he would be very successful and Gurvinder was successful in his career.

Gurvinder was doing very well for himself, he was Sales Head in large financial services company. He was doing very well in his life and career. Gurvinder had an expensive destination wedding, bought a luxurious 4-BHK house, and then bought a second home for vacations in a hill station and bought a sports car (already had two cars). Gurvinder would often splurge on latest gadgets, overseas vacations and luxurious clothing.

Whatever Gurvinder achieved in his career would cause envy in others but Gurvinder was not happy.

His dream of retiring early is still a distant dream. His salary was going towards various EMIs and maintaining his life style needs without investing for the future.

Gurvinder blindly followed his dream of living life king size that prevented him from an early retirement.

Yogesh – The sensible investor

Like Gurvinder, Yogesh too is successful in his career but has been investing regularly from the day he earned his first salary. With every increase in salary and expenses, he would ensure that his SIP amount was topped up, and would invest part of his bonus. He invested his money into Mutual Funds including an asset allocation fund and a retirement fund. Yogesh was focused on his career, he did not have to spend much time and energy on selecting a fund or timing an asset class or trying to “buy-low-and-sell-high”. He followed his advisor for investment advise and has been on his wealth creation journey.

Yogesh had a simple wedding with close family members and friends. He drove a hatchback and would never splurge on latest gadgets but once in a while would upgrade his lifestyle.

Yogesh was very happy with his decision and was close to his goal of early retirement – A happy investor.

What is our learning from these examples?

Achieving early retirement is not an easy goal. It requires a lot of investment discipline and to achieve a balance between what you wish to spend now and what you invest for your future (delayed gratification). For more details on retirement planning refer Monthly Musing – Retirement Planning – Most Ignored Life Goal.

Disclaimer: The above stories are fictional and intended only to explain various investment / spending behaviours and their possible outcomes. The above does not constitute investment advice or give assurance of early retirement or returns from any investment or asset classes. In view of individual nature of circumstances and risk appetite, readers should seek professional advice when taking investment related decisions. 

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