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.
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.
To speed up the retirement investment cycle, you can build a portfolio structured with more risk - and the potential for higher returns. It should in any case be adequately diversified to safeguard against sharper than normal market downturns that can be hard to recuperate from and that can ruin any opportunity to achieve your early retirement goal. There are various strategies to diversify a portfolio, and how you do so should be guided by your age, your risk appetite, your growth and income needs, and your long-term objectives.
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.
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.
The Zacks Rank regularly identifies attractive growth stocks ideal for retirement investing. Here are just a few that might be worth consideration: AmerisourceBergen (NYSE:ABC), Investors Bancorp (ISBC) and Federated Investors (FHI). These are top-ranked stocks, with at least 5% earnings and sales growth over the past five years, and boast beta equal to or lower than 1.
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Federated Investors, Inc. (FHI): Free Stock Analysis Report
AmerisourceBergen Corporation (ABC): Free Stock Analysis Report
Investors Bancorp, Inc. (ISBC): Free Stock Analysis Report
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Zacks Investment Research