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.
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 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.
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.
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.
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: CareTrust REIT (CTRE), Bristol-Myers Squibb (BMY) and CenterPoint Energy (CNP). 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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CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
CareTrust REIT, Inc. (CTRE) : Free Stock Analysis Report
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