8 Steps To Retire Early

By?Patrick Donley?and?Shawn O'Malley, edited by?Robert Leonard??·?September 5, 2022

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Welcome back to?We Study Markets!?

We hope everyone has had a relaxing Labor Day Weekend full of fun, friends, and family?

We've got a shorter version of the newsletter for you today.?

We've been out and about enjoying ourselves, and having three days off got us thinking about?The Art of the Good Life?and what retirement could look like. So, we're going to dig into that below.

It might be tough to think about retirement plans, though, when you glance at some of the year-to-date returns below???

MARKETS: YEAR-TO-DATE

*All prices as of market close at 4pm EST

Today, we'll discuss eight steps to retire early in just 3?minutes to read.

Let's do it!???

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DIVE DEEPER:?8 STEPS TO RETIRE EARLY?

When we say the word "retirement," what image pops into your mind?

Is it a tropical vacation somewhere? Is it a golf course with your buddies? Relaxing with grandchildren? Or volunteering for a cause in which you believe??

Many of you are familiar with the FIRE movement, which stands for Financial Independence, Retire Early.

During the pandemic, over 3 million Americans were able to retire early, and many of us wouldn't mind joining their ranks.

According to the United States Social Security Administration, the average age for retirement is 67 years old. If you hope to retire five, ten, or even twenty years earlier, following the eight steps below could help you secure your financial future to fulfill whatever your retirement dreams may be.

To retire early, you must learn to be your own retirement financial planner. It may sound like a big undertaking but read on.

Determine the Kind of Lifestyle You Want

The first baseline step in considering retirement is determining how much you'll need to lead the kind of life you want. We discussed Nick Sleep's "X-Factor"?here, where X was the amount of money he felt was sufficient to put food on the table, pay for his kids' education, own his own home, and have a nice lifestyle.

Assess Your Current Financial Situation

The next step is to figure out how much money you already have saved in retirement accounts. Once you know what you currently have, you can estimate how much more you'll need to save based on the "X-Number" you determined in the first step.

Review your monthly income and spending habits.?

How much will you need to save per month to get to your target retirement savings number?

Wipe Out Any Debt

Bad debt is a killer for retirement. View it as a murderer of dreams. High-interest rate debt, especially from credit cards, must be ruthlessly eliminated.?

Many of these cards can have rates as high as 18%.?Once that extra expense is eliminated, you can be paying yourself that 18% back in savings instead.

Educate Yourself in Investing

Like learning any new skill, it can take time to become fully immersed in the language of investing, but becoming more financially knowledgeable is vital to reaching your retirement goals.

Talk to family and friends who have already retired and ask for advice. If you're worried about not having extra funds to set aside for retirement, cut down on your spending to generate extra cash.

We can't stress the importance of financial education enough. Read, learn, and listen to podcasts. Guiding people to grow financially is our goal at?The Investor's Podcast Network.?Take advantage of our many resources?here.

Learn the 4% Rule

How much can you withdraw from your retirement accounts once you reach your "X-factor" number??

The 4% rule is a standard way to determine what this yearly withdrawal can be.?It suggests that 4% of your retirement savings could be withdrawn in your first year of retirement.?

If you have a $1 million retirement portfolio, $40,000 could be safely withdrawn from the principal to cover your living expenses for the year.

The effects of inflation on retirement can be more complex, however, and many investors like to be more conservative and lower the withdrawal rate to 3.5% or even 3%.

Research Wonderful Companies

Start researching companies within your circle of competence that you know and love. Stay away from all investment products you don't understand.

We like to buy wonderful businesses with outstanding management at a fair price. Companies that have a wide moat, a large margin of safety, improve the world, and have the ability to raise prices with inflation are particularly attractive. Also, consider having Warren Buffett's holding period — forever.

Choose the Best Investment Vehicle for You

There are many different types of investment vehicles, and you need to determine which combination will be best suited for your retirement goals.

Some of these retirement vehicles include IRAs, 401(k)s and pensions, Roth IRAs, bonds, and mutual funds. Each of these has its benefits, and drawbacks and continuing ongoing financial education will help you determine which ones are best for you.

Stay on Track and Keep Investing

Times of financial uncertainty like we're experiencing today can make retirement goals seem daunting.?Consistency is key, though, and the most important thing is to maintain discipline in saving and continue to sock money away. Keep your expenses under control, and don't fall prey to lifestyle creep with each pay raise.

Final thoughts

As George Foreman said, "the question isn't at what age I want to retire, it's at what income."

Some of you may already be retired. Some may just be getting started saving for it. Whatever your situation, we'd love to hear from you.

Let us know your thoughts on navigating retirement.?

How much is enough??

How do you plan to spend your days??

Do you have a big dream you'd like to accomplish after your work years are over??

Also, be sure to check out our free?How to Invest in Stocks: Ultimate Guide for Beginners?to get started on your retirement goals today.

SEE YOU NEXT TIME!

That's it for today on?We Study Markets!?

See you later!

All the best,?

P.S The Investor's Podcast Network is excited to launch a?subreddit?devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more! Join our subreddit?r/TheInvestorsPodcast?today!

? The Investor's Podcast Network?content is for educational purposes only. The calculators, videos, recommendations, and general investment ideas are not to be actioned with real money. Contact a professional and certified financial advisor before making any financial decisions. No one at The Investor's Podcast Network are professional money managers or financial advisors. The Investor’s Podcast Network and parent companies that own The Investor’s Podcast Network are not responsible for financial decisions made from using the materials provided in this email or on the website.