Investing to Retire Early

Investing for early retirement can be a lot more complex than normal retirement investment planning.  First of all, most of us who start investing for retirement at a young age have a lot of time to make our investment targets, and when it comes to retirement planning time is your friend and the more you have the better off you are.

Why do younger investors have a better chance for early retirement?  Well first, we all know that the economy has its ups and downs, and sometimes the market goes in the tank like it has recently.  Younger investors who lost money in rough economies have a lot more time to make it all back over the years. 

Younger investors also have the opportunity to invest in whatever securities they want and can make it work either way.  On one hand if you want to invest in only low paying, but safe investments like bonds, bond funds or low risk mutual funds then you can accumulate your returns and mutilpy them quickly with the compounding interest. 

On the other hand you can swing for the fences and invest in some high risk, but potentially high reward investments that can put your retirement income much higher bracket, and if it doesn’t work you still have time to follow a normal investment path that will put you right where your retirement income target should be.

Older investors who are closer to retirement on the other hand have a much tougher time with their investment strategies.  When you are close to retiring, or retiring early, you can’t afford to modify your investment strategy much.  AS you progressively get closer to retirement you should invest in less and less risky investments, and more and more safe investments like bonds that provide as much security as possible.

The purpose of investing in secure, low paying investments as you get closer to retirement is to make sure you protect any investment income that you have.  Hopefully your strategies for investing have paid off well enough to get you to this point of course.  Now you won’t get rich with bonds or low risk investments, but you will make a little something, maybe a few percent on your money so it isn’t like it’s sitting in a box underneath your bed, but you won’t get rich on it either. 

My point with this whole thing is that investing for early retirement comes in stages and varies depending on how close you are to retirement.  By planning early with your investment strategies you can be sure that you have enough time to meet your goals.  If you wait around on the other hand you may have to rush your investments and take more risks than you need to.  You also won’t have enough time to make back your losses if the market crumbles.