I had the good fortune of meeting a visiting friend’s parents recently. I understood from him that his father had retired from active work at the age of 50 some years ago and now spent his time ‘consulting’ and mentoring fledgling businesses. I asked if I could get in touch and ask him a few questions about early retirement, alternative sources of income and how he compares his present with his time in the ‘active’ workforce. He said he would read my website and then get back to me. I heard from him recently and he loved the last line of his email – “Like what you’re trying to do with your site. Not for everyone, but more power to you.” Thrilled with the response, I spoke to him on the phone and emailed him a list of questions. He happily agreed to respond to my emailed queries and what is reproduced below is a slightly edited version of his story. For confidentiality, I have agreed not to use his name.
I enjoyed this tremendously. This was one of my first experiences of an in depth interaction with someone who was perhaps living the dream I aspire towards. This also gave me an insight into the life of some one who had taken the decision to retire early a lot earlier than most, in a time and a milieu where this was not particularly common.
#1 To start things off, can you tell us a little bit about yourself, your career and what you do now?
I’m an engineer by training. I grew up in Calcutta, India and went to study engineering at the Indian Institute of Technology in Delhi in the early 70s where I received my degree. I wasn’t the best student around, so I couldn’t get a scholarship to head State-side for a Masters like some of my batch-mates. I focused my disappointment towards the job market, and landed a job at Avery India, selling weighing machines. That got boring after a while and I moved on to the fast moving consumer goods sector, joining Hindustan Lever shortly thereafter. I had good stint with them, right up till the early 90s, where I moved to US to help set up a business for a friend. The IT boom had not yet fully yet taken off but we made some early inroads. The times were hard initially but we made some great strides over the years, designing and selling data processing software to mid market corporates.
Its been a great journey and its afforded me and the family to a bit of travel and given me an insight into different industries and thought processes. I sincerely recommend moving out of your comfort zone whenever possible.
Currently I spend my time mentoring three early stage start ups. I also sit on the board of a listed company as a non executive director.
#2 If possible could you please share your current net worth? And a rough break up by asset class? How did you accumulate your corpus?
My current net worth is somewhere in the range of INR 10 – 12 crores (or SGD 2.17m – SGD 2.6m). While it won’t get me into any rich list any time soon, its adequate and comfortable. 45% of this is in the 2 properties I own. Roughly 20% is in blue chip equities and dividend mutual funds. The balance is fixed income investments. A very small portion is parked as a private equity investment.
This was accumulated via pure savings alone – and by investing them over a period of time. No short cuts. I didn’t win the lottery.
#3 How does this translate to passive income? Grateful if you can share some numbers.
I have a rental property which earns me INR 50,000 per month (or SGD 1,100). The equities support with regular dividends. The bulk of the ‘passive’ income comes from fixed income investments, as these pay the highest interest rates (so far!). Also, a small pension from previous employers helps. Overall, we’re comfortable.
I estimate his total annual passive income at approximately INR3,000,000 or SGD65,000. I think it is a comfortable level from a financial security perspective. This should be more than adequate for 2 adults living in a tier 2 city such as Kolkata. This is also reasonable for 2 adults living in Singapore, assuming your housing expense is taken care of.
#4 How do you ensure that your income keeps pace with inflation and covers for other ad hoc emergencies? We’re in a low interest rate scenario currently.
No silver bullet. My active employment income acts as a buffer. I have quarterly sitting fees coming through from the board meetings that I attend. There’s also the investment in one of these companies which I hope to cash in on at some stage in the future. I have been lucky insofar as to still have skills that seem to be in demand these days. Mentoring is something I enjoy, hence I am happy to increase some work load in future to increase earnings in the form of consulting fees. It also keeps me engaged and on the learning cycle. I work only a few hours every day so that is fine as well.
#5 Any regrets from the past? I ask from a personal finance standpoint. Anything you might have done differently when you look back at your younger days?
Sure. There’s always things one could have done differently. I am happy overall with where I am. You realise when you’re older, that you don’t need the latest bling after a point, so you spend more on experiences and travel and things like that. When you’re my age, you needn’t spend half your pay check on the latest I-phone or whatever.
I wish I had discovered the power of compounding earlier than I did. I only really started thinking about the future and saving towards retirement in my mid 30s. I wish I had done more earlier. But those times were different. There wasn’t as much information about personal finance back in those days and people didn’t think as much about it then. You contributed towards your PF and your pension and spent the rest. You saved towards buying a house and earning enough to ensure that your family was well supported.
#6 You retired earlier than your peers. That couldn’t have been easy. I am sure your contemporaries continued to work for a few more years. How did that feel? Did that have any negative impact on your life? For the corporate types, often the job title becomes the primary identity.
I was very clear that I did not want to continue the corporate life beyond a point, especially after my children had left us. The move towards consulting / mentoring was deliberate. Gave me more time to spend with young businesses, travel with the wife and spend some real leisure time. Sure there are some adjustments to make and some banter to hear from the typical folks who question the decision to retire early. But in the end, the important friendships and relationships have continued to endure regardless. And I’ve been better off for it. I haven’t had any major issues dealing with my early retirement, and my closest friends and relatives have generally been supportive. I’ve been lucky, I guess.
I really enjoyed hearing from someone who quit active work life early. Some key points from this conversation really leaped out at me.
- No short cuts to building net worth. Save and invest. Earlier the better.
- Broad asset class allocation. He has multiple streams of income – interest, dividends and rental. Nicely buttressed by active income, which he can increase or decrease per his bandwidth.
- Material things don’t matter after a point. Free time and the power over this time are more important.
- Focus on developing skills. The power to keep learning and adapting is hugely handy and will keep you in the work force longer – should you need to rejoin it in the future.
- Worrying about what others think of you will keep you from realizing your dream life state. In most cases, the people who matter will not treat you any different, just because you’ve now taken a path different from the conventional.