Simple Secrets Anyone Can Use to Reach Early Retirement - October 30, 2019
Building sufficient financial resources to retire early may sound like a dream, but making that dream come true is not as hard as it may sound. The main thing is simply to save more money each month. No big deal, right? Well...
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.
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.
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.
Zacks offers investors useful rankings for lower risk growth stocks for retirement portfolios. The following are a few selections that merit a closer look: Lockheed Martin (LMT), Cedar Fair, L.P. (FUN) and Phillips 66 Partners LP (PSXP). Earnings and revenue has seen growth of at least 5% or higher over the last five years, with a beta of 1 or lower.
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Phillips 66 Partners LP (PSXP): Free Stock Analysis Report
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Cedar Fair, L.P. (FUN): 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.