Five Investment and Financial Strategies for an Early Retirement
Everyone dreams about retiring early. Unfortunately, not very many people are willing to do what is necessary to make their dream of early retirement come true.
After all, retiring early requires you to plan early, save money, and invest properly. But if you don’t have the right strategy or mindset for doing these things, then you will most likely fail.
Early retirement for most people would be between the age of 50 – 55. The sooner you start planning for your retirement, the sooner you can actually go ahead and retire.
This is because every year, you will be investing a percentage of the money you save into various retirement accounts.
These accounts generate interest which makes you even more money. This is just one financial strategy to help you build more wealth. There are several other strategies too.
Below are the top 5 investment and financial strategies for early retirement in Australia.
1. Real Estate Investment Trusts
There are certain real estate companies called “Real Estate Investment Trusts” which you can invest in. Shares of these companies are typically sold on stock exchanges and they’re known for generating a huge return on investments made.
They’re basically companies which invest in real estate that produces income.
When these trusts make money from their real estate holdings, you make money based on how many shares you own. Since real estate is considered to be a safe investment, then investing in a real estate investment trust may prove to be a wise choice.
2. Investment Retirement Account
Investment retirement accounts, also known as IRAs, give you a way to save for retirement without having to pay taxes on the money. If you keep the money in your IRA, then the money is tax exempt.
If you do that starting at 30 years old and then you retire at 55, you could end up saving between $125,000 and $250,000. And if it’s a Roth IRA, you can earn interest on the contributions you make into the account.
3. Online Passive Income
One way many young people are able to retire early is by establishing online passive income. This is where you have online businesses or websites which are generating income without you having to do much work on them.
Once you set up these income streams, they are set on autopilot to make you money.
These could be blog websites, YouTube channels or other online ventures which do not require much of your time each day. If you can generate at least a few thousand dollars in passive income each month, you can invest it in your retirement accounts.
4. Become a Minimalist
The best way to save money is to stop spending so much money. This means that you avoid extravagant purchases and expensive holidays. Focus on living a minimalist lifestyle where you only purchase what you need to live.
This will allow you to save extra money for your retirement that you would otherwise spend on meaningless things.
5. Invest in Index Funds
Index funds are a safer way of investing in financial markets. Rather than purchasing stock in one company, you are investing in a mutual fund which is the equivalent of several mainstream companies.
The S&P/ASX 300 Index represents the market capitalization of the 300 largest companies in Australia.
If one of these companies were to lose value, this would be offset by the success of the other companies. Historically, index funds have given investors a positive return on their investment.
By the time you retire, you should see substantial growth from your initial investment.