Early retirement is possible with planning and saving. It is my #1 financial goal, and most decision I make on spending and saving have early retirement as a factor in the decision.
Early is relative to person retiring. I am planning to retire about age 53, which is a year after my twins start college.
Here are some comments:
1) spend less than you earn when working
2) save a significant percentage of your income- for me this is 20%
3) invest with mindset the money has 40 years+ to be invested (meaning I can subject myself to more risks for a potentially higher reward).
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Hey guys I am looking for some advice. I am 29 years old and have been contributing to my employers deferred comp program and an Vanguard Windsor 2 account. Both of these accounts let me withdraw the money when I am 59 years old but the problem is with my jobafter 25 years of service I will be retired at 46 years old. Is there anything I can invest in that will allow me to withdraw my money at that age
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Consider these issues
1) will the deferred compensation have enough in 25 years to live off of? In 25 years it might be a reduced benefit, make sure you know what the terms and conditions are.
2) If the plan provides X% of your salary, are you able to live (retire) on a fraction of what you were earning while working?
--those two issues do not even deal with ages 47-59, they just deal with is your retirement plan enough to retire on--
Assuming above gives positive answers, here is what you want to do for ages 47-59. You have 13 years of income and need to work 25 years to save for 13 years.
3) try to save a percentage of your income- 20% is a reasonable goal, but its OK to start smaller, and grow this over 3-4 years to a good percentage.
4) learn about building a diversified portfolio
two links on this board to read (post any questions to this thread):
Questionaire for people starting retirement planning
and
Investment risk questionaire
5) here is a point to ponder- if you could save 33% of your (GROSS) pay and put it in a savings account, every 2 years you would save 66% of your salary, and in 26 years, you would have 13 years income set aside.
**What you want is clearly doable without taking significant risks, biggest risk is will you live long enough to spend the money you are saving LOL**
33% means if you gross 50k, you want to save about 16k per year- easierr said than done...
6) Learning how to invest the 16k is what you asked about, but its not that simple... because the Roth IRA steve suggested has rules about taking money out before age 59.5. It was good advice, but before you blindly open a Roth, you need to learn lots of issues about IRAs, withdrawing money, and taxes to make effective decisions for yourself.
If it were me, I would do the following
a) Put 5k per year into a Roth, but before you do this, READ up on the rules for taking money out, and do some calculations to see if this creates more problems for you than it solves
b) know your 33% number, subtract 5k, then put the rest of the money in a taxable account. I would put about 11% into cash and 22% into equity and bond based investments (This would be a portfolio which is 66% stocks/bonds and 33% cash).
c) get to know your tax form, and know how to invest b) so the tax form is not complex (muni bonds, tax efficient equity investments). The questionaire I linked to above will get you started on basic taxes- its not tough if you can handle numbers and limits and percentages.