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Powerful Proof Anyone Can Invest for an Early Retirement - December 09, 2019

Zacks Equity Research

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 ...

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.

The first point is to adhere to the key principles of long-term investing, including developing a diversified portfolio that includes stocks with various 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.

Once you've begun saving at a higher rate and you have an investment plan, put that money to work in your plan as quickly as you can. Don't worry about finding the "perfect time" to invest - simply put the money in and keep it in. Let compounding work to help you grow your retirement savings at an exponential rate.

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: PennyMac Mortgage (PMT), AT&T (T) and Phillips 66 Partners LP (PSXP). 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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Phillips 66 Partners LP (PSXP) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
PennyMac Mortgage Investment Trust (PMT) : Free Stock Analysis Report
 
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