| Strategies for early retirement |
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71Corvette
First Time Poster
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| Strategies for early retirement |
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Hello all. I'm curious to learn about investment strategies for early retirement. My goal is to retire at about 55.
Ever since I started working I've been investing into my 401k and company ESOP at an aggressive rate. However, I realize that drawing from these savings before age 65 comes with early withdrawal penalties.
Are there specific investment or saving strategies that I should be looking into that will allow me to avoid early withdrawal penalties? How do people typically manage this? Do they simply set aside some post-tax income and invest it in a separate investment account?
Any thoughts would be appreciated.
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Sat Jan 28, 2012 5:56 pm |
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oldguy
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quote:
Do they simply set aside some post-tax income and invest it in a separate investment account?
That's what I did. You should have a taxable investment account anyway, you need to have some pre-59 1/2 wealth to use as a Fallback EF, children's college, real estate investing, a small business, as well as early retirement. Also, your 401k investments are irreversibe, you can't get that money in bad times, so you have to hold back. Not true with a taxable account - you can go in 100%, the money is available the next day in an emergency.
BTW, I would stop the ESOP, lost of money has been lost by investing in the company that you work for. Your company is already responsible for your pay, your healthcare, why put your wealth in that same basket of eggs? Can you sell it and put that money in a better place?
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Sat Jan 28, 2012 8:09 pm |
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michelaw
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Aim should be clear and basic aim is to save money for retirement.
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Thu Apr 12, 2012 5:58 am |
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ETFs_R_Best
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Whatever you do AVOID annuities! I could go on and on about them.
Also BEWARE of brokers (independent ones, Merrill Lynch, etc). They are like used car salesmen looking to earn the highest and most commissions.
Invest in unmanaged index funds. ETF's are the easiest investment products to invest in through any deep discount broker (E Trade, Scott Trade, Ameri Trade).
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Sun May 13, 2012 2:30 am |
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clydewolf
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| Re: Strategies for early retirement |
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quote:
Originally posted by 71Corvette
Hello all. I'm curious to learn about investment strategies for early retirement. My goal is to retire at about 55.
Eliminating your earned income will have a negative effect on your SS Retirement Benefit when you begin receiving that benefit. And that can also have a negative impact on your spouse's benefit and Widow's/widower's benefit.
Our SS Retirement Benefit is based on a 35 year time of our highest earnings.
Typically our highest earning years are after age 50. Also if more years are needed to make up that 35 year period, zero earnings are used for those missing years. quote:
Ever since I started working I've been investing into my 401k and company ESOP at an aggressive rate. However, I realize that drawing from these savings before age 65 comes with early withdrawal penalties.
I like ESOP plans. As other poster's have stated, this can be a dangerous investment. Remember the bankruptcy of ENRON in 2001? Employees were encouraged to invest their 401k contributions in ENRON stock. http://en.wikipedia.org/wiki/Enron_scandal
It is generally recommended to have no more than 10% of our retirement money invested in our employer stock. quote:
Any thoughts would be appreciated.
One idea may be to invest in a ROTH IRA if you other wise qualify. You can take a distribution of your annual contributions at any time free from tax and penalty for any reason.
If you do not qualify for a ROTH IRA contribution then do the "back door" conversion from a TIRA to a ROTH IRA. The Conversion will have a 5 year waiting period to eliminate the 10% early distribution penalty.
You could also use a taxable investment account with a broker for your investing.
Taxes must be paid annually, but the money is yours at any time for any reason.
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Tue May 29, 2012 7:25 pm |
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sethm
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Location: United States
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There are two basic ways to go about retiring early: saving up a lot of money, or developing alternate sources of income. The key to the savings approach to early retirement is to be able to consistently sock away a significant amount of money each year. For example, someone retiring at age 45 who expects to need about $5,000 a month during a retirement of 40 years will need approximately $1,000,000 saved up at retirement. In order to save up this much, he or she will have to save $25,000 each year starting at age 25 and have an average investment growth rate of 7% each year. That same investor could reduce the annual savings requirement to $10,000 by holding off on retirement until age 50.
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Sat Jul 14, 2012 8:40 am |
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ETFs_R_Best
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Avoid brokers and all of their "retail" investments. Invest in ETF's. Here's a few...
SPLV - This ETF seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S&P 500Â Low Volatility Index.
WFVK - This ETF seeks to replicate the Wilshire 5000 Total Market Index.
IJR - This ETF seeks to provide investment results generally equivalent to U.S. small-cap stocks, as represented by the Standard & Poor's SmallCap 600 Index.
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Sat Jul 14, 2012 8:45 am |
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