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.
The typical rule of thumb given by financial planners is to have a goal of saving up to 20% of total earnings. But if you want to retire when you're younger, that percentage will probably need to be more like 40% to 50% of your income. Of course, that's not so simple since a big part of your paycheck goes to day-to-day, necessary expenses. So if you want to save that much, you need to make some serious lifestyle adjustments. It requires making changes, but it's doable.
A relatively new movement called Financial Independence, Retire Early (FIRE) has been developed around this "sacrifice and over-save now to retire early" concept. FIRE followers develop strict savings programs (up to 75% of income) and make associated sacrifices like living in small apartments, walking to work every day, restrictive diets, and so on. This path may be too restrictive for many, but the mindset offers some takeaways that might be 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.
Once you have accelerated your savings and put an ongoing plan in place, invest your savings into your portfolio as soon as possible. Don't try to time the market. Leave your portfolio alone, and let the compounding nature of the markets do its magic to help grow your retirement nest egg exponentially over time.
You may want to look at growth stocks with attributes acceptable for retirement investing like low beta, strong earnings estimates, positive sales growth, and expected future growth.
The Zacks Rank routinely recognizes lower risk growth retirement portfolio picks, and here are a few that may be worth considering: WesBanco (
WSBC Quick Quote WSBC - Free Report) , Clearway Energy ( CWEN Quick Quote CWEN - Free Report) and Global Medical REIT ( GMRE Quick Quote GMRE - 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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. 9 Retirement Mistakes that will Ruin Your Retirement