Retirement in the contemporary sense is more about financial freedom than hanging up your working boots. It is the ability to live your life within the desired lifestyle, without relying on a regular income.

It is no longer about age and one can practically plan to achieve this before the traditional retirement age of 60-65 years.

There are many reasons to seek out early retirement. But what could be some of the impediments to fulfilling that goal? Leverage or your loans are one big deterrent when it comes to thinking about retiring. They can impact early retirement more but is just as bothersome at any age.

For many, the largest and longest loan repayment obligation is their home loan. Can you plan your retirement while you are still repaying that home loan?

What is the proportion of monthly loan repayment?

It is important to consider how much of your monthly income is eaten up by your loan EMI. Are you using up more than 50% of your monthly income to repay your housing loan?

If your monthly EMI is a very high proportion of your monthly income, you have to consider lowering it. You may not be able to repay the entire loan.

Lowering the EMI, however, by pre-paying some amount can be useful. Whatever means of regular income you have set up post-retirement caters mostly to lifestyle expenses, to fit in an EMI will mean lowering your lifestyle too. Hence, the lower the EMI, the better it is.

If your monthly loan repayments are a low proportion of your monthly income, say 20%-30%, you may be able to accommodate this even post-retirement.

Some expenses go down automatically, like daily travel, expenses related to regular work attire and entertainment. Others can be controlled a little till your loan is paid off.

There is no easy way out, you will have to tighten the noose around “optional” expenses and manage your investments well.

Keep your retirement savings pool growing

Many believe that post-retirement all savings necessarily have to go towards safe and stable return investments. However, without investing in assets like equity you are in danger of inflation eating up your savings faster than you can reach them and you miss out on wealth creation.

If a pending loan EMI is a bother, you can prepay the outstanding loan before you retire and to make up for the gap this leaves in your retirement kitty, invest a larger portion in equity assets.

The money invested in equity will come in use 5-7 years into your retirement, not any sooner. This will give your retirement funds a growth push for later years.

However, it means a sharp cut down in lifestyle expenses in the early years of retirement, as you will have to keep a lower proportion in safe assets towards regular income.  Which in turn means a lower monthly income to begin with.


Retirement with a hefty loan is going to be difficult, however, it is not an impossible feat. Give yourself 5-7 years to plan and repay your loan. You have to manage your expenses and expectations accordingly. A few years of prudent money management, saving and smart investing can help you in managing both loan repayment and retirement.

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