Accomplishing the financial cushion to retire early is a fantasy for most. Bringing the fantasy to reality is not as difficult as it sounds. The key is straightforward: Save significantly more every month. Sounds simple, correct? One moment.
Typically, advisors peg 15% to 20% of total income saved each month as a goal - but if you want to retire earlier, you probably have to ratchet that number up to 40% or 50% of your income. Not a feat easily accomplished when you review your take into account that a good portion of your paycheck goes to essential, non-negotiable lifestyle items. However, if you are willing to make some serious lifestyle changes and sacrifices, it's possible.
A generally new development called Financial Independence, Retire Early (FIRE) has been created around this "sacrifice and over-save now to retire early" idea. FIRE supporters create exacting savings plans (up to 75% of income) and make related compromises like living in small homes, walking to work every day, prohibitive weight control plans, etc. This way might be unreasonably prohibitive for many, yet the mentality offers a few takeaways that may merit consideration.
First, stick with the fundamentals of long-term growth investing: Choose a diversified portfolio of stocks with exposure to different styles, sizes, sectors, and regions.
You may be able to accelerate your potential retirement earnings by consciously seeking higher returns (and also accepting more risk) in your investment portfolio. But whatever your risk tolerance, your portfolio must be diversified to protect against extreme market movements that could jeopardize your early retirement objective. You can choose from a number of ways to allocate investments to diversify your portfolio, and these should be informed by your individual goals, growth and income needs, appetite for risk, and age.
Once you've begun saving at a higher rate and you have an investment plan, put that money to work in your plan as quickly as you can. Don't worry about finding the "perfect time" to invest - simply put the money in and keep it in. Let compounding work to help you grow your retirement savings at an exponential rate.
Growth stocks with low beta, strong earnings estimates, positive sales growth, and expected future growth are an excellent way to determine investable growth stocks for your retirement.
The Zacks Rank routinely recognizes lower risk growth retirement portfolio picks, and here are a few that may be worth considering: Summit Financial (SMMF - Free Report) , Tyson Foods (TSN - Free Report) and Cambridge (CATC - Free Report) . These growth stocks have strong Zacks Ranks and a beta of 1 or lower, with earnings and sales growth of at least 5% over the past 5 years.
Do You Know the Top 9 Retirement Investing Mistakes?
Whether you're planning to retire early or not, don't let investing mistakes derail your plans.
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