18 Moves That Will Help You Retire Early and in Style

Do you daydream about retiring as you plod through your 9-to-5 job? Are you wondering how a neighbor or relative managed to quit working at age 59 and go traveling?

For many people, retirement — never mind “early” retirement — seems out of reach. But with focus and self-discipline, you could amass enough money to retire earlier than you might think possible. Here are some tips to get you started:

1. Spend less than you earn

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The formula for retiring early starts with actually saving money. Some experts recommend you spend no more than 90 percent of the money you make and sock away the remaining 10 percent.

If you have zero savings right now, build an emergency fund and keep it in a high-interest-bearing savings account. You can find the best rate on savings accounts in our Solutions Center.

2. Start saving early

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Thanks to the power of compounding interest, a little money saved now can go a long way at retirement time. But to get the most benefit, start saving as early as possible.

Let’s say you’re 20 years old and can manage to put away only $100 a month into your retirement fund. Assuming you average 8 percent returns — optimistic, but possible with good investments — you’ll have about $500,000 by age 65. Even better, over that 45-year period, you’ll only have invested $54,000 of your money to get all that cash in return.

If you wait until you’re 40 to start saving $100 a month, you’ll put in $30,000 of your money and — at that same rate of return — build a nest egg worth about $95,000 by age 65. Not bad, but wouldn’t you rather have a half-million?

3. Don’t leave money on the table

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If someone tried to hand you $100, would you say no?

That’s what you’re doing when you fail to take advantage of a 401(k) employer match. The company is basically giving you money, with the only hitch being that you must pony up some of your own cash for the retirement fund too.

You won’t get rich by passing up golden opportunities like this for extra cash. If your employer offers a 401(k) match, make sure you are taking full advantage of it.

4. Minimize your taxes

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The rich stay wealthy in part because they’re savvy enough not to let Uncle Sam take too much of their money.

When you’re investing your retirement money, use tax-sheltered accounts such as IRAs and 401(k)s whenever possible. In addition, be smart about which type of tax-sheltered account you use.

Traditional retirement accounts enable you to invest pre-tax money and then pay the piper once you make withdrawals in retirement. Meanwhile, Roth accounts allow you to invest money after it’s taxed — and therefore not pay taxes on withdrawals.

For help determining whether a traditional or Roth account is better for you, check out “Confused by Retirement Accounts? Roth, Regular IRAs and 401(k)s Made Simple.”

5. Take a little risk

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You could put all your money in bonds and sleep well at night knowing you’ll probably never lose any of it. But with that approach, you’re not going to retire a millionaire either.

Stocks and real estate are where the money is to be made. There is always the risk of the stock market or real estate market — or both — crashing. Take heart, though, in knowing that stocks and real estate have historically appreciated in the long run and offer higher returns than less-risky investments.

6. Stay informed about your investments

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Don’t mistake taking a risk with being dumb.

A smart risk may be investing in an emerging-market fund. A dumb move may be pouring your life savings into a speculative currency.

How do you know the difference? By researching available investments, weighing your options and selecting the amount of risk that works for your situation. For example, those nearing retirement should minimize their level of risk, while recent college grads can be more daring because time is on their side.

Perhaps start your research by reading about how to invest in a mutual fund or how to select the right investment adviser.

7. Break free from the herd

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When the stock market plummeted during the Great Recession, many people freaked out and sold their investments.

They took a bad situation and made it even worse. By selling their investments right when the market was bottoming out, they missed out on the stock market’s rebound.

Shrewd investors snatched up stocks at bargain-basement prices after the 2008 crash and then saw their stocks’ value climb by double digits in the following years. Same thing goes with the housing market. When the housing bubble burst, the smart people were the ones who were buying houses, not selling.

It’s easy to follow the herd. But if you want to be rich, you need to keep a cool head and make rational financial decisions, even in the midst of a crisis.

8. Put off Social Security

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While it might seem counterintuitive, many people are better off waiting to file for Social Security benefits. While you can file as early as age 62, you’ll get a lot more money each month if you can wait until you’re 70.

As we explain in “Maximize Your Social Security,” you can influence your payout to a surprising degree by making such changes to your retirement plans.

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