Achieving the financial freedom to retire early a dream for most. Making that dream a reality isn't as tricky as it sounds. The secret is simple: Save a lot more each month. Sounds easy, right? Not so fast.
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.
This concept of intensive saving for an early retirement has spawned a movement called FIRE (Financial Independence, Retire Early). Followers of FIRE strive to save up to three-quarters of their income, and make other adjustments too: live in small homes, walk to work each day, practice strict diet plans, and more. Even if this lifestyle may sound a bit unreasonable, the ideas behind it are worth considering.
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.
To speed up the retirement investment cycle, you can build a portfolio structured with more risk - and the potential for higher returns. It should in any case be adequately diversified to safeguard against sharper than normal market downturns that can be hard to recuperate from and that can ruin any opportunity to achieve your early retirement goal. There are various strategies to diversify a portfolio, and how you do so should be guided by your age, your risk appetite, your growth and income needs, and your long-term objectives.
After accelerating your savings and setting up an ongoing plan, invest your savings into your portfolio at the earliest opportunity. Try not to attempt to time the market. Stay put, and let the compounding characteristics of the markets do its work to help grow your retirement wealth exponentially over time.
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: AbbVie (ABBV - Free Report) , Bristol-Myers Squibb (BMY - Free Report) and Darden Restaurants (DRI - 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.
If you have $500,000 or more to invest and want to learn more, click the link to download our free report, 9 Retirement Mistakes that will Ruin Your Retirement.