Investment Strategies to Retire Early

March 24, 2016 | By Steven DiGregorio

Retire Early


About a third of all Americans think that they will not have enough money saved to retire. Carefully planned and executed retirement strategies will get you there — it’s possible to even retire early.


Start executing these early retirement strategies today, you’ll be glad you did:


1. Determine the amount of money you’ll need to retire

First calculate how large your investment portfolio needs to be and determine the amount that your annual income number has to be. For planning purposes keep it simple. Conventional wisdom dictates that most people can retire on an annual income that is 80% of their pre-retirement income.

There is considerable data to forecast future costs such as if health insurance will rise, fall or remain constant. Planning ahead will shape future decisions about downsizing your home to lower your expenses or whether or not to pay off your mortgage sooner.
Set a safe withdrawal rate
Most retirement strategies posit that a safe withdrawal rate pulls out about 4% of your investment portfolio each year as income. The expectation is that your portfolio will produce an annual rate of return between 6% and 10%. Based on these projections, your retirement portfolio will continue to generate returns and keep growing.

Determining how large your portfolio is then based on a 4% safe withdrawal rate — multiply your necessary annual income number by 25. The investment portfolio number is arrived at by the withdrawal rate of 4%, which constitutes 1/25 of your portfolio, therefore you must create a portfolio that is 25 times larger than the annual income requirement.
Factor-in inflation
You’ll also need to factor inflation into your plans. There’s no way to know what inflation will be in the future, but you can estimate it based on past history. You can do that by going to the Bureau of Labor Statistics inflation calculator, and tracking what inflation has done over the past 20 years.

You may also need to plan for contingencies in your income number too. If you plan to purchase a boat or a vacation home, that will have to be reflected in the size of your retirement portfolio.

2. Lower your cost of living to a minimum

The less money you need to live on, the more you’ll save, and the sooner you’ll retire. Therefore keep expenses to a minimum, live on less money and invest in your retirement now. Yes, early retirement is possible.

Many retirees actually spend more money after they retire, initially. Create a retirement budget to accurately estimate your spending (use BlackRock’s online Retirement Expense Worksheet). Factor in health care costs and health care coverage needed until Medicare is awarded at age 65.  Streamline your spending and use the savings to invest heavily in a low-cost index fund.

Lifestyle planning strategies —
To keep costs down consider relocating, proximity to family, friends, and important medical providers.  Moving from a high cost of living area to a low cost alternative can make your retirement plans do-able. Consider visiting the area first and renting for awhile before you buy.

Investment Strategies to Retire Early

3. Get out of debt, stay out of debt and start saving for retirement 

Debt reduces your cash flow, and that reduces the amount of money that you need to save for retirement. Carrying even some debt into retirement will only raise your cost of living, and make early retirement far less certain.

Pay off your highest credit card interest balances first and use the money freed up to payoff all of your remaining cards. The sooner you stop overspending and pay down existing debt, the sooner that money can be redirected to your retirement.

4. Don’t be house poor?

Don’t buy a house that will own you. Your house is a long-term expense that constitutes a major impact on your cash flow. House poor is a condition of living that costs so much to live there that there is very little money to do anything else.

Higher income homes require more costly maintenance, typically higher utilities, and higher maintenance costs. When it comes to housing and early retirement plans, you’ve got to be guided by the less is more doctrine — consider a modest home to realize more savings for retirement.

5. Save more money now — retire early 

To retire in 40 years, plan on saving about 10% or 15% of your income every year. Want to retire in 15 or 20 years? You’ll need to save  30%, 40% or even 50% to retire on time. Don’t limit yourself to contributing to just the employer plan, direct additional funds to a traditional or Roth IRA. Consider starting up a side business that will accelerate your retirement savings and supplement your income upon retirement.  Create a Solo 401(k) plan.

6. Improve your retirement position

Many find themselves needing to increase their income to achieve their retirement portfolio number. There are several possibilities: get a better paying position, limit the amount you draw on your retirement fund, work part-time work for a while, or run a side business for a time.

For every year you take social security early, your lose roughly 8% a year in benefits.

Instead, consider living on your retirement plan savings alone for a couple years before you reach full retirement age.

7. Set realistic expectations on your investments rate of return 

The average annual rate of return on the S&P 500 Index has been in the ball park since 1928.  A retirement portfolio of  80% stocks and 20% fixed income securities yields an annual rate of return of about 8%. For planning purposes use this number directionally, but talk to an investment advisor first. Don’t speculate.

Calculating your retirement portfolio number
Bankrate has an excellent 401(k) savings calculator that will help you determine how much money you‘ll need to save each year in order to retire.
Here are the major factors to consider upon calculating how much you will need to save to hit your retirement portfolio number:

        • Percent to contribute
        • Annual salary
        • Annual salary increase
        • Current age
        • Age of retirement
        • Current 401(k) balance
        • Annual rate of return
        • Employer match
        • Employer match ends

There are so many unknown variables that will impact your retirement. Many people end up retiring sooner than they planned for any number of reasons. Get a retirement check-up, talk to a financial advisor to assess and plan your retirement.

The strategies provided here are the most important, staying true to the plan and making wise adjustments along the way will make your retirement goals a reality.


About Compass Asset Management Group

Our boutique-style firm has an investment philosophy is both prudent and value driven. We combine research from the largest firms on Wall Street with three decades of market experience to provide strategic, tactical and dynamic investment management.  Compass Asset Management Group, LLC delivers personalized financial planning, estate planning and investment management advice in a private setting with a high degree of sensitivity to your concerns and objectives. Our goal is to exceed yours expectations by listening closely, understanding deeply and communicating well through frequent, personal consultations entirely focused on your financial goals.

Make the right choice with your financial future. Consult Compass Asset Management Group for advice & guidance that will change your life. Plan better to live better…Call Compass Asset Management Group.


Please note that the content of this blog does not constitute tax advice and is only intended for the educational purpose of the reader.  Please consult your tax advisor for specifics regarding your circumstances.

For more information contact us at 845.563.0537 or

Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.






Sources —

Rose, J. (July 12, 2015). 7 Simple Strategies to Retire Early. Forbes, Investing.

Updegrave, W. (December 16, 2015). How to tell whether you can afford to retire early. CNNMoney.

Photo Cred —

Retrieved on March 15, 2016 from×1885+442+0/resize/604×327!/format/jpg/quality/85/

Retrieved on March 15, 2016 from



Tags: 401(k), 403(b), 457, IRA, pension, retirement, retirement distribution, retirement income, Retirement Planning, rollover IRA, ROTH, Roth IRA, social security

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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