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Operation Early Retirement! - Page 2

How to Retire by Age 50

  • Start early, save tons. "If people understood how powerful compound interest is, they'd start saving a lot earlier," says Jan Dahlin Geiger, author of Get Your Assets in Gear! Smart Money Strategies. If you start in your 20s, you can skate by saving 15 percent of your income a year, but if you start in your 30s, sock away at least 20 percent.

    Your investments should be a savvy mix of stocks (50 to 70 percent) and bonds, which together yield 7 to 10 percent a year. (Savings accounts and CDs won't keep pace with inflation.) Review and rebalance your portfolio annually.


  • Get smart. If you're not educated about how the market works, "you're going to get ripped off," Geiger warns. Read magazines and books, and take classes in personal finance.


  • Pay yourself first. The smart move, says Geiger, is to contribute to your 401(k) up to your employer match, then throw as much as you can into a Roth IRA (the money is taxed now, but you will be able to withdraw it without tax consequences after it has multiplied). Anything left over goes into your tax-advantaged 401(k) or IRA.


  • Live below your means. "Debt is a filthy, dirty word," insists Geiger. Self-made millionaires tend to inhabit the same house for 20 years or more and drive used cars.


  • Obey your spending plan. A $5,000 vacation in your 20s "is $30,000 out of your retirement account. Is the vacation this year worth it to you later?" asks Bob Foland, president of The IRA Specialists in Englewood, Colo. Early retirement can become a reality, adds Foland, only if you and your partner both share "a burning desire" to sacrifice now in the hope of a later reward
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