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10 Expert Financial Tips To Help You Retire Early

- August 17, 2020

Michael S. Schwartz, CFP®, AEP®

I apply a multidisciplinary approach to wealth management dovetailed with structured tax planning.

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A successful retirement isn’t limited to when you’ve reached a certain age—it can happen whenever you no longer need to work to meet your financial obligations. To many people, the thought of retiring at 40 seems like a stretch. However, if you get started early enough and exercise care and discipline, retiring significantly ahead of the typical age is achievable.

What should someone who wants to enjoy an early retirement do to ensure their success? Below, 10 members of Forbes Finance Council share some sage advice.

1. Know your money will need to ‘work overtime.’

Financial literacy and planning are imperative. Maximize your retirement plan contributions and enlist a licensed advisor to help direct your investments based on your goal of retiring early. Your money will need to work overtime, so it’s crucial to set it up for success as soon as possible. – David Haass, Elite Insurance Partners, LLC

2. Get advice and start early.

First, it is almost universally recognized that seeking professional independent financial advice will get you to your objective quicker than “going it alone.” Second, the earlier you start your retirement planning, the easier and more effective it is likely to be. And third, in addition to saving you need to invest to ensure your money actively works for you. – Nigel James Green, deVere Group

3. Pay yourself first.

Pay yourself first before paying others. Save 20% of every dollar off the top of what you make and create a disciplined approach to managing cash flow. It’s not what we make, it’s what we do with our earnings that counts! – Michael S. Schwartz, CFP®, AEP®, Magnus Financial Group LLC

4. Determine your passive income requirements.

I would divide my current monthly standard of living by 35%. This is how much I need per month in passive income to cover my living expenses, save 40% of my passive income to reinvest and account for 25% taxes. For example, if I live on $10,000 per month today I need to have $28,572 coming in each month to truly stay financially free. From here I can determine which investment options are right. – Jerry Fetta, Wealth DynamX

5. Run conservative projections.

Run cash flow projections and make sure your assumptions are extremely conservative. A lot can change in the future, and you need to be prepared. Taxes, inflation, the cost of healthcare, etc. may all be higher in the future, and you need to be prepared for that. – Amir Eyal, Mylestone Plans LLC

6. Fully invest in your 401(k).

Fully invest in the first 401(k) that is offered to you—even if you have to eat ramen noodles. The earlier you start and the more you can afford will make all the difference in being able to retire early. Having freedom and options when you get older is more valuable than you can imagine. – James Hewitt, CEO, Advisor, Angel Investor

7. Be ready to cover your monthly burn.

Know your monthly burn rate. That’s the most important step. See what you are comfortable spending and what you can and can’t live without. Then it’s just a matter of figuring out what the easiest way is for you to get the funds to cover your monthly burn. It could be through dividends, rent, other passive income or an occasional gig. – Aaron Spool, Eventus Advisory Group, LLC

8. Create multiple passive income streams.

Create as many passive income streams as possible. Borrowing money is currently very cheap, and people should take advantage of it. Investing in things like real estate or long-term investments that will turn into liquid assets over time is an easy way to ensure an early retirement. – Jonathan Moisan, Advertise Purple

9. Be prepared to have a side hustle.

The F.I.R.E. movement—financial independence, retire early—is not as hot a topic now, but the principles of equally aggressive saving and cost-cutting are powerful if practiced with unremitting discipline. But here’s the nugget you may not know about F.I.R.E. proponents: Most have a side hustle, whether it’s a second gig or a stream of passive income. What will your added income be? – Wm. Scott Page, LifeGuide Partners

10. Make a habit of being frugal.

Live well beneath your means, save and invest. If you intend to live the rest of your life on savings earned by age 40, your lifestyle in retirement will be the biggest obstacle. Habits are hard to break. So if you get in the habit of being frugal before you retire, you increase the odds of not outliving your money. – Mia Erickson, Whitnell


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Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.