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 ...
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.
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 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.
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.
Zacks offers investors useful rankings for lower risk growth stocks for retirement portfolios. The following are a few selections that merit a closer look: First Community Bancshares (FCBC), Meridian Bancorp (EBSB) and Ahold NV (ADRNY). 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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Ahold NV (ADRNY) : Free Stock Analysis Report
Meridian Bancorp, Inc. (EBSB) : Free Stock Analysis Report
First Community Bancshares, Inc. (FCBC) : Free Stock Analysis Report
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