5 Investments That Can Help You Retire Early and Ones That Won’t

The following is a guest post.

When planning for your retirement, you want to make solid investments that will help you live comfortably after you leave the workforce. You will find a lot of advice on how much you should be saving now if you want to retire early. Most of the advice you will get will be about saving and investing in a certain percentage of your income. Investment is a great way to prepare for retirement, and while there are effective methods of investing, there are other methods that will not help you retire early. 

That said, below are 5 investments that will help you retire early. 

Max Out Your Retirement Accounts

One of the top ways of investing for your early retirement is maxing out your retirement accounts. These are the most basic retirement investment plans, so you should optimize them before thinking of other investment decisions. These include 401(k) and IRA or any other that is available to you. 

Multiply and Diversify Your Income Streams

You will never go wrong with multiple and diversified streams of income if you are thinking of retiring early. Relying on one stream of income may not provide enough finances for you to plan for an early retirement. For instance, if you are working a 9 to 5 job, then consider starting a side hustle. This way, you can pay all your expenses comfortably and still have enough to invest for your retirement.

Live Below Your Means

This might not seem like an investment but it will go a long way to helping you invest for your retirement. In your 20’s, you may feel the need to spend every penny that you earn since you have no family and have ‘time’. You want to have fun and live well, but you will not retire early if you are living beyond your means. Be clever enough to cut on some of your biggest expenses like housing, transport, and food, and think of investing more. 

Invest in the Stock Market

One reason why investors are always rushing to invest in the stock market is that it helps your money to grow. If you want your money to grow and multiply as many times as possible, then you should consider investing in the stock market. In addition, some stock markets also offer gains in the form of dividends and you can be able to buy shares from the company you invest in. Stock market investment is great because it makes you money while you sleep. 

Real Estate

Investing in real estate is also a good way to accumulate wealth for your early retirement. The good thing about real estate is that it is an investment that appreciates in value. The price of a piece of land today will not be the same tomorrow and the same case goes for buildings. It will be higher, and investing in real estate has different ways of making income. So, if you have enough to invest in real estate, do so and you will enjoy your retirement as early as you want it. 

Investments That Won’t Help You Retire Early

There are also other investments that will take you nowhere near an early retirement. Here are some of these investments.

Whole Life Insurance

Save yourself the disappointments of relying on a whole life insurance policy as your retirement plan. Most insurance experts will advise you to take out a whole life insurance plan if you want an investment plan. The argument is that whole life insurance has a cash value accumulation component which will act as your savings plan. What they will not tell you is that whole life insurance is very costly. Normally you want to compare rates with different products to see how much you’re overpaying. 

So, this will be a very expensive investment, and to make it worse, it has death benefit limitations. A whole life insurance policy allows you to borrow money against the cash value, which eventually reduces the death benefit from your policy.

Savings Account

Opening a savings account and putting part of your earnings there is a naive ‘investment’ idea. Any mogul you know will black and white tell you that a penny saved is still a penny, but if you invest in your money, you multiply it. 

The idea of investment is not ‘storing’ your money, but rather finding ways to multiply it whenever you decide to put it into. The reality is, the bank uses the money you have ‘saved’ with them to invest and make returns, even worse, your interests will be ridiculously low. So you are helping the bank make more money while you are not making any yourself!

Bottom Line

Anyone can retire early, but you have to start preparing as soon as now if you want to do so. Making the wrong decision may jeopardize your plan to retire early, so make sure that your investments will get you where you want. Be smart and work now when you have to avoid working later when you don’t need to. 

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