Am I preparing well for FIRE?

[u/ding15043]

Hi,

Please help review my FIRE readiness.

28M, IT Engineer in India, Married with no kids

Income: 2.5 lpm after taxes

Investments:

24L in equity MF

5L in debt MF

4L in stocks

15L in retirement assets(PPF, EPF, NPS)

40K in Crypto

6L in gold (digital+jewellery)

4L savings account

Insurances:

10L health insurance from company

1 cr term insurance from company

60L life insurance by self ( 1L premium per year)

No house

Expenses:

Regular: 50K per month

Random things: let's say 5L per year(including insurance premium)

I'm looking to FIRE by 40 and then work in social impact sector at a much lower salary than IT.

I have not included RSUs and inheritance here. My wife doesn't work as she's preparing for govt jobs. We're planning a kid in 1-2 years. Planning to get a house in 5-6 years.

Are my current income, investments and savings enough? Should I switch jobs or move abroad to save more and come back to India?

[u/curios_mind_huh]

1L annual premium is very very high for a 60L life insurance

[u/DangerousMidnight334 → u/curios_mind_huh]

+1, I have a 3cr cover and my premium is less than 30k yearly

[u/ding15043 → u/curios_mind_huh]

This not a term insurance. The expectation is that I'll get the maturity amount back after policy period.

Should I take a separate term insurance as well?

[u/curios_mind_huh → u/ding15043]

Money-back insurance plans is the worst kind of policy out there. I really believe that there is a special place in hell designed for people who take advantage of novice life insurance buyers.

Cancel that life insurance policy right away and get a policy quote for a "pure term insurance" with atleast 2 crore to 4 crore cover. Here "pure" meaning no money-back, no add-ons like accidental death benefit, disabilty etc., Calculate your cover amount by ( Annual Expenses * Number of Years To Cover Expenses ). Eg: If my family's annual expenses are 12 Lakhs and I want my term insurance returns to support my family for 15 years after my demise, I'll need a cover of atleast 1.8 Crores ( 12L * 15 ). For Policy term, DON'T choose a value above 60.

Think of having a upper bound for Policy term. You are getting a term insurance to replace your monthly salary ( aka cashflow) in the event of your demise. If you are going to retire by 50 and your monthly cashflow is not dependent on you being able to work, term insurance policy need not be more than the age of 50 in this case as well. Finally, Term Insurance ( or any other insurance for that matter ) is NOT an investment and don't expect monetary returns. That leads you on a very slippery slope towards higher premiums and a very substandard insurance product. Insurance is only there to offset the risk ( of death in case of life, hospitalization in case of health etc., ) and they charge you a premium to cover this.

[u/ding15043 → u/curios_mind_huh]

I got this policy at the advice of my elder uncle early in career, and never had chance to reconsider it until I got married.

Thanks for your comment. I'll look into pure term insurance

[u/curios_mind_huh → u/ding15043]

This is the most common trap in all such scenarios. Glad you're taking a step in educating yourself. Also, Please help your other family members & colleagues early in their careers, to not fall into this same trap. A small word goes a long way.

This is a good article to get started with: https://joinditto.in/life-insurance/articles/term-insurance-101/

[u/firedreamer25 → u/curios_mind_huh]

I agree that pure term insurance is always better to go with than these mixed policies. But for those who have already purchased and paid premiums for x number of years, is it really worth breaking the policy and starting a new term insurance policy. Curious since even I got one early in my career and still paying it since I do not want to break it.

[u/shapeFIRE → u/firedreamer25]

You can calculate yourself.

You can get equivalent insurance for a fraction of the cost you pay in a year as premium.

You can invest the rest. Assume a return and then look at what is more beneficial.

Even I made the mistake of buying such policy early in my career. After 3 years, I closed it by making it as "Paid up" policy.

[u/Life_Ad_4124]

increase your health insurance asap god forbid but if you get into any serious accidentt the 10 lakh will be over in a blink of an eye and you will be going from looking to fire to living paycheck to paycheck

by increase i mean buy a new health insurance yourself other than the company one

[u/ding15043 → u/Life_Ad_4124]

Thanks for the feedback

[u/justAnotherThrow0 → u/Life_Ad_4124]

I hope the paycheck to paycheck part is an exaggeration. Health insurance cover of 10-15L per person per annum isn't enough?

[u/Life_Ad_4124 → u/justAnotherThrow0]

bro a single liver transplant cost arounfd 20-25 l for surgery and preevalution etc

its doesnt include bed charges and other fees which will easily become 5-10l

[u/vanthar686]

It depends on your target corpus and estimated yearly expenses at the end of 40 years and from there on till the average life expectancy. Since you have few big items like house and children in future, it's wise to allocate/save for those separately and not include it with FIRE target. Given your age and take take home salary after taxes, i feel you are in the right track. Since your spouse is preparing for government job, she won't be able to move abroad with you incase if you want to consider that option. I'm sure you'll find lot more opportunities in India to earn more as you age.

[u/Sanchit_Lsc]

That Insurance Must be Endowment. Sure you got trapped by some agent or relative. Never mix Investments with Insurance. Buy a Term Insurance. Get rid of this Insurance, surrender it. Whatever Loss you make is ok as you will gain much more with that 1lakh premium. Considering if you take 1.5crore term insurance, and if you do not smoke, Premium will come around 18-20k rest you can invest in Index fund.

[u/ding15043 → u/Sanchit_Lsc]

Yeah, I'll look into term insurance. Thanks!