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.
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 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.
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'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.
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: Lakeland Bancorp (LBAI), Lockheed Martin (LMT) and Grupo Aeroportuario del Centro Norte (OMAB). 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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Grupo Aeroportuario del Centro Norte S.A.B. de C.V. (OMAB) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Lakeland Bancorp, Inc. (LBAI) : Free Stock Analysis Report
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