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.
Usually, advisors advise 15% to 20% of total income saved every month as an objective - yet in the event that you want to retire earlier, you likely need to tighten that number up to 40% or half of your pay. Not a discipline easily practiced when you review or consider that a substantial segment of your paycheck goes to basic, non- negotiable lifestyle needs. But if you are willing to make some serious lifestyle adjustments and trade-offs, it's achievable.
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.
To accelerate the retirement investment cycle, you can construct a portfolio designed with more risk - and the potential for higher returns - but it should still be appropriately diversified to protect against larger than average market drawdowns that can be difficult to recover from and ruin any chance to accomplish your early retirement goal. There are numerous ways to diversify a portfolio, and how you do so should depend on your age, your risk tolerance, your growth and income needs, and your long-term goals.
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.
Astute investors pick retirement growth stocks with 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: Meridian Bancorp (EBSB), OceanFirst Financial (OCFC) and First Community Bancshares (FCBC). 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.
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First Community Bancshares, Inc. (FCBC): Free Stock Analysis Report
Meridian Bancorp, Inc. (EBSB): Free Stock Analysis Report
OceanFirst Financial Corp. (OCFC): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.