Last month I decided to do what most people said couldn’t be done. As an aside, what great motivation proving people wrong is. I decided to retire early. Retirement is an interesting word for me because when I tell people I’m retired I feel the need to explain to them what retirement means to me. Retirement doesn’t mean that I’ll never work again, it means that I don’t have to work for income....
An important step to take during your investing years is to measure your progress to early retirement. Here is how I go about measuring my progress to financial independence. Financial Independence Formula Net worth - the value of all your investments toward financial independence Annual Spending - the amount of annual spending you will need during financial independence Years of Spending - divide your net worth by your annual spending When your Years of Spending is greater than 25, your are financially independent Why 25 Years of Spending Conventional wisdom is that you should be able to safely withdraw 4% of the value from your portfolio annually....
If you are contributing the maximum amount in your tax deferred accounts (401k, 403b, IRA) and you have money still available to invest, what should you do? Should you use the funds to start paying off your mortgage early or invest the fund in your taxable accounts towards retirement? This decision is based on the interest rate of your mortgage. If your interest rate is high you should start paying down your mortgage, if it is low you should invest the money....
You already know that you need to save and invest a large amount of money to retire early. Where should you invest your money and what type of account is best for each type of investment. Here is how I split up my portfolio among various asset classes and accounts. Allocation to Stocks Most people know that investing in stocks will give you the largest return over a long period of time....
When I tell people that I plan to retire by age 50, they ask me how this will be possible. First you must understand what my definition of retirement is. Early Retirement is: having the financial resources so that I don’t have to ever work again The key is “that I don’t have to” and not that I will stop working. My idea of retirement is that I will be in control of whether I choose to work or not and not be reliant on work to provide monthly income....