Technology

Simple Secrets Anyone Can Use to Reach Early Retirement - July 15, 2020

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.

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 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.

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: The First Bancshares (FBMS), L3Harris (LHX) and Farmers National Banc (FMNB). 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.


Click to get this free report

Farmers National Banc Corp. (FMNB): Free Stock Analysis Report

The First Bancshares, Inc. (FBMS): Free Stock Analysis Report

L3Harris Technologies Inc (LHX): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Technology Videos

    Some of the Ways Video Is Changing How Business Is Being Done

    Brightcove Chief Marketing Officer Jennifer Smith discusses some of the ways video is changing how business is being done and key themes from Brightcove PLAY.

    Oct 6, 2021

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More