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Yin & Yang for Early Retirement: Austere Living, Appropriately Aggressive Investing

By    |   Tuesday, 17 March 2015 06:40 AM

 
Who among us doesn't feel like telling our boss to "take this job and shove it," and then ride off into the sunset of early retirement?
 
MarketWatch retirement writer Elizabeth O'Brien offers several recommendations for those contemplating early retirement.
 
  • "Live below your means." Sheyna Steiner, senior investing analyst at Bankrate, told O'Brien that a good rule of thumb is to save 25 times your annual budget before retirement. "For those of us who [aren't top executives,] generating a nest egg of that size involves years of frugality," Steiner notes. Avoid purchases large — a car, a home — and small — gourmet coffee — whenever possible. Any money you save and then invest wisely will multiply through the wonder of compounding.
  • "Stay appropriately aggressive." The idea that you need a very conservative investment strategy in retirement is a myth. You actually need some stocks to grow your wealth enough to fund your retirement needs. Joe Heider, president of Cirrus Wealth Management, told Steiner that a good rule of thumb is to weight your portfolio 60 percent toward stocks a few years before retirement and then stick to that allocation. Remember that equities have historically returned about 9 percent a year, compared to 3 to 5 percent for bonds.
 
Three crucial factors when you're searching for retirement investments are safety, dividends and expenses. John Waggoner of USA Today lists several funds that shine in those areas.
 
  • Vanguard Target Retirement Income (Ticker: VTINX). This is a fund of funds designed as an all-in-one solution for retirees who want to see both their principal and income increase, he writes. The fund allocates 65 percent of assets to bonds and 20 percent to U.S. stocks. Morningstar gives VTINX its top rating — gold. "Vanguard Target Retirement's unassuming construction has appeal," writes Morningstar analyst Kathryn Spica.
  • Schwab U.S. Dividend Equity ETF (SCHD). "If you're looking for a portfolio of large-company stocks with a long history of raising dividends, this is the fund for you," Waggoner writes. "The fund's criteria looks not only for high dividends, but high-quality earnings and balance sheets as well."
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Who among us doesn't feel like telling our boss to take this job and shove it, and then ride off into the sunset of early retirement? MarketWatch retirement writer Elizabeth O'Brien offers several recommendations for those contemplating early retirement.
Early, retirement, austere, living
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2015-40-17
Tuesday, 17 March 2015 06:40 AM
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