Simple Secrets Anyone Can Use to Reach Early Retirement - March 31, 2020

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 ...

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.

This concept of intensive saving for an early retirement has spawned a movement called FIRE (Financial Independence, Retire Early). Followers of FIRE strive to save up to three-quarters of their income, and make other adjustments too: live in small homes, walk to work each day, practice strict diet plans, and more. Even if this lifestyle may sound a bit unreasonable, the ideas behind it are worth considering.

To start, stick with the essentials of long-term growth investing: Build a diversified portfolio of stocks with exposure to 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 have accelerated your savings and put an ongoing plan in place, invest your savings into your portfolio as soon as possible. Don't try to time the market. Leave your portfolio alone, and let the compounding nature of the markets do its magic to help grow your retirement nest egg exponentially over time.

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 routinely recognizes lower risk growth retirement portfolio picks, and here are a few that may be worth considering: Redwood Trust (RWT), Virtu Financial (VIRT) and Meridian Bancorp (EBSB). 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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Meridian Bancorp, Inc. (EBSB) : Free Stock Analysis Report
 
Redwood Trust, Inc. (RWT) : Free Stock Analysis Report
 
Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
 
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