Investing for Early Retirement

Making early retirement happen doesn't have to be as difficult as you might be thinking it is. It's not a matter of inheriting an unexpected financial windfall or winning your state lottery. It's a matter of smart financial planning. A study that was conducted as early as 2003 showed that roughly 21% of all Americans who are trying to figure out how to retire early and actually have some kind of retirement savings are not overly confident that they will have saved enough to live on.

Additionally, the study showed that only 3 in every 10 people in the work force had some type of savings plan for retirement. Investing for early retirement requires a number of steps to take if you are going to succeed. The following are some tips for implementing and maintaining a savings plan so that you have the opportunity to retire earlier than others.

Determine what your current lifestyle is costing you - then try to figure out what type of life you want to lead once you have retired. Just keep in mind that you will have to adjust to living on a fixed income which could make a big difference compared to your current lifestyle. Additionally, remember that you need to take long-term healthcare costs into consideration as well when calculating things out. Start by developing a plan for investing in early retirement.

Consider two different stages of retirement when making your financial plans - Les Abramowitz, the author of many books regarding retirement, states that you need to look at retirement in two separate stages - the period of time prior to reaching 59 years of age and the period after reaching age 59. The first thing you want to do is to address the post-59 retirement stage. This would include 401(k)s, annuities, IRA's (Individual Retirement Accounts), pensions, savings, and Social Security benefits.

Tax-deferred opportunities should be taken advantage of - one of the ways to secure the after age 59 period is to maximize the amount of money you put into any retirement account. Many financial planners will tell you that you should have opened a 401(k) or an IRA as soon as you started working. Either of these is considered as "can't lose" options as long as you keep investing in them for the long haul.

Invest "leftover" money - although the term "leftover" money sounds contradictory, it isn't if you are budgeting properly. If you have leftover money, consider investing in mutual funds which are non-tax sheltered. Just make sure the funds you invest in have a proven track record of decent returns. Despite the fact that earned returns on these funds are not exempt from taxation, they are tax efficient.

Stick to the plan without faltering - not only does investing for early retirement long-term investing and savings plans, it requires tremendous discipline. If you want to reap the benefits of early retirement you will have to keep debt to a reasonable minimum and not live quite as lavishly as you may currently be. Just remember, that when you haven't saved enough, it's difficult to turn back and make up the deficit.