While the answers can vary depending on age, health, financial situation and unique life circumstances, here are some tips that we’ve found to be useful in improving the probability associated with a successful early retirement:

• Start saving and investing early – we’ve all heard the rule of thumb that we should save at least 10% of our income.  The reality is, guaranteed income sources like pensions, are no longer what they used to be.  We don’t encourage anyone to place their future into the hands or decision-making ability of others (i.e. the elimination of pensions and/or the possibility of future Social Security reform).  Instead, we feel that saving at least 20-25% (at a minimum) of your gross income is necessary to increase the likelihood of a successful early retirement. The sooner an individual can begin saving and investing, the better the chances he or she will be able to retire early.  We’ve never had any clients tell us “geez, I sure wish I had saved less money when I was younger”. As Albert Einstein once said, compounding (interest) is the most powerful force in the universe.

• Don’t spend beyond your means – our hope is that the Great Recession is something that taught us all the importance of living within our means.  If you don’t have the ability to live comfortably based on your existing income sources, how do you know how much money you’re going to need in retirement?  If you don’t know how much money you’ll need during your retirement years, how will you know how much you have to save for retirement? You get the point - it’s a circular question and there’s no answer.  If you can’t afford it or don’t have the means to pay for it, you probably shouldn’t have it and most likely don’t need it.

• Eliminate debt & focus on budgeting – debt is a natural part of life and isn’t something we need to shy away from.  Having said that, anyone can take on debt, but not everyone can pay it off. Entering your early retirement years free of debt is a considerable advantage for a successful and long-term retirement.  It creates far more flexibility in your cash flow and distribution strategies, particularly during negative return stock market years.

• Create a comprehensive financial plan – work with a CERTIFIED FINANCIAL PLANNER™ professional to develop a financial goal plan.  The earlier you can do this, the more likely you can begin implementing recommendations to increase your odds of being able to retire early.  Most people don’t think they have the complexity or financial resources that are required to seek out the advice of a Financial Planner. What most people don’t realize is that it’s this professional advice that is so critical early in life.  The sooner we can shift our goals, strategy and focus, the better chance we all have in achieving our desired outcome.

• Diversify your investment assets – don’t keep all of your eggs in one basket.  One of the more common things Financial Advisor’s hear from clients or prospects is “I’d like to buy more of my current employer’s stock since it’s performing so well and everyone at the company says there is considerable upside”.  Well, if all of our employers were telling us this, why would it make sense to look at alternatives? The reality is, we all know that nothing goes up in value forever. Markets and individual securities are all cyclical. The only certainty in this world is uncertainty.  We believe in a diversified asset allocation strategy focused on producing the returns necessary to achieve a desired goal or outcome with an expected level of risk.

• Continue to make adjustments – life has the tendency to throw us curve balls.  What we plan for at age 25 is not always what we’re aiming for at age 45. Financial plans need to be flexible as each of our unique circumstances change over time.   

At the end of the day, we’re all responsible for planning our own financial futures.  This planning does not have to be done alone and we encourage everyone to work with a CERTIFIED FINANCIAL PLANNER™ professional to build a plan that is flexible and adaptable.  

Don’t delay or buy into the theory that it’s somehow somebody else’s responsibility to plan for your future.  This is particularly true if you have a strong desire to retire early. Take control of your finances and begin saving and investing early in life; understand your cash flow situation and do what it takes to live within your means; work with a CERTIFIED FINANCIAL PLANNER™ professional to create a detailed plan; and stay diversified in your investment approach.