5 things you need to do now to retire early as a millionaire

  • I’m obsessed with retiring before 50, so I asked financial planners how to mitigate risk now.
  • They recommend paying off all debt, further diversifying my portfolio, and getting insurance.
  • They also suggest avoiding lifestyle inflation and strategizing to lower my taxes when I retire.

After spending most of my 20s screwing up my finances, I’ve worked overtime to clean up my act in my 30s so far. I started saving for retirement, putting cash into an emergency fund, investing in index funds, and sticking to a strict budget.

I also became obsessed with trying to retire early (before 50) and be a millionaire. As I am less than 16 years from that moment, and my

net worth

is far from seven figures, I am actively doing what I can now to achieve that goal. Although I am investing, saving and working towards new sources of income to increase my net worth, I am afraid that something unplanned will happen that will take me further away from my overall plan.

To make sure I’m managing as much risk as possible now, here’s what financial planners say I should consider if I want to retire early as a millionaire.

1. Continue to diversify my portfolio

Investing in index funds, individual stocks, and cryptocurrencies is just something I started doing a few years ago. As I continue to grow my investment portfolio, financial planner Evon Mendrin says it’s a good idea to further diversify my portfolio to help with risk.

“Concentration drives wealth creation and diversification helps protect it,” says Mendrin. “It usually takes a concentration on your career or investments to build enough wealth for early retirement, spending all of your time being the best in a profession or taking advantage of company stock options.”

Mendrin recommends investing in thousands of stocks in the US and around the world rather than a small number of companies (such as through index funds or exchange-traded funds) and having the right mix of stocks, real estate , bonds, cash, and other assets to build wealth for retirement.

2. Address any debt

While I work hard to save and invest, one thing that could get in the way of my millionaire retirement plan is taking on too much debt. Financial planner Jay Zigmont says that if you can pay off all your debts (including your home), retiring early becomes much easier, since you can invest more of your income.

3. Get the right insurance

When planning for the future, it’s easy to forget what we need right now to handle potential financial emergencies. That’s why Zigmont says making sure you have the right insurance is so important.

“Many people don’t think about insurance until they need it, which may be too late,” says Zigmont. “Make sure you have adequate coverage for your home and cars, including an umbrella policy. Make health and disability insurance a priority. When you turn 50, have a long-term care plan with your retirement funds or a long – Current term care insurance policy.

4. Have 3 different types of investment accounts

In addition to diversifying investments, financial planner Lauren Anastasio says you can reduce the risk associated with changes in the tax code, which will undoubtedly occur between now and your retirement, by having investments in three different types of accounts: taxable, with deferred taxes and tax-free growth.

“A taxable account is one that is not designated for retirement, such as a personal brokerage account, from which you can make penalty-free withdrawals at any time,” says Anastasio. “A tax-deferred account is one that often receives tax-deductible contributions but taxable withdrawals during retirement, such as a pre-tax 401(k) or traditional IRA. A tax-free growth account would be a Roth 401 (k), Roth IRA, or HSA.”

This strategy allows you to choose which accounts to withdraw money from before and during your retirement to maximize your income, reduce your tax burden and ensure the continued growth of your money.

“Working with a tax advisor can help you be strategic about when and from what account to pay in retirement to greatly reduce your tax bill,” adds Anastasio.

5. Don’t spend more while earning more

As you near retirement or find yourself in a position where you can make more money, financial planner Charles H. Thomas III says to beware of lifestyle inflation, as it’s a risk that can take you off track. His plans.

“When you get a raise at work, it’s tempting to spend that raise on a more comfortable lifestyle,” says Thomas. “Instead, think about how you can save or use some of your increased salary to pay off some debt. Over time, the habit will get easier and you’ll still have a comfortable lifestyle.”

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