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4 keys to early retirementForum overview » Planning for early retirement » 4 keys to early retirement 
 
 randy (moderator)
Posted 2005-09-07 07:34:48 August 05, 2005 The Four Keys to Early Retirement The last time I discussed the hurdles to early retirement. It may be difficult, but it isn't out of reach. In my professional experience I have found that there are four common traits to individuals who have or are on their way to retiring early: 1.) Having a Plan Every individual has or had a plan in place. This involves defining when they plan to retire, what their retirement needs will be, and determining what it will take to get there involving their level of saving, use of account types, and investment strategy. When you go on vacation, you don't just jump in your car and take off. You need to make travel arrangements, reservations, and have direction. The same thing works in all aspects in life and if you plan things out, the better your chance of success. If your way of planning involves flying by the seat of your pants, good luck. 2.) Save like a Demon All early retiree's saved early and often. By saving early, you benefit from the power of compound investing; otherwise known as the "Eighth Wonder of the World". For example, if you saved $1,000 per month and earned 10%, the value would be $759,369 at end of twenty years. If you started five years later, you would end up with $414,470. That extra $344,899 was made by investing an additional $60,000 in the first five years. Second, saving provides options and flexibility. If you're ahead of the game you can take less risk with your investing strategy, spend more during retirement, retire earlier, persevere in a severely bad market or absorb any unexpected financial loss that may come your way. 3.) Invest in Stocks Early retiree's believe in the power of equity investing. By having a well diversified stock portfolio, they have been well rewarded over the long term. According to Ibbotson Associates, $1 invested in large cap domestic stocks in 1925 would have been worth $2,533.20 at the end of 2004. What if you invested in risk free T-Bill's over that same time frame? You would have had $17.87. And not only are stocks part of the accumulation strategy, it remains a majority of their retirement investing strategy as well. It certainly isn't a bad idea to keep a couple years of retirement funding in a safe, low risk asset. But to cover long term needs and keep up with inflation, stocks aren't a luxury; they are a necessity. 4.) The Motivation It all starts from within. If you aren't willing to make the sacrifice, it isn't going to happen. There are many distractions today that take away from keeping your eye's on the prize and a lot of pressure to keep up with the Jones's. The individuals who retired early or who are on their way manage to keep focused on knowing that early retirement is one of the things that matter most to them; not only do the want to do this, they act on their motivation. This isn't reinventing the wheel. This is basic common sense. If you want to retire early and have the above characteristics, I would say that you are on your way. Posted by Jeff Bogue at 10:27 AM
d0ug
Posted 2007-05-08 08:36:03 What ever you plans are when you retire {golfing, sailing, and skiing} what ever it is start now. Learn it before you retire. If you are not doing it now you will probably not do it when you retire.
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