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The most common advice you will receive about retirement savings says to put as much as possible into an individual retirement account or 401(k) as early as possible. While this common strategy makes sense for those planning to retire in their 60s or later, savers looking to reach financial independence or to retire early might need to be more aggressive.

This is because traditional IRAs and 401(k)s have stiff penalties for withdrawals made before reaching 59 1/2 years of age.  People planning to retire in their 30s through early 50s must choose where they put their investments wisely. Otherwise, you may be sitting on a whole bunch of cash that you can't withdraw for another 20 years.

Distributing investments among three categories if possible is recommended to individuals who want to retire early. These three categories are investment accounts, real estate, and a side business.

Retirement and brokerage accounts: Traditional retirement accounts are still important in the overall plan. If your employer matches contributions to a 401(k), make sure you save enough to meet that match. It's free money!

Many people considering early retirement have high-paying jobs. They don’t plan to stay in very long. If this is the case, Victor Gersten, a certified financial planner and the owner of San Diego-based Gersten Financial Planning, recommends maxing out 401(k) accounts and fully funding an IRA as well. Savers may want to consider a Roth IRA, as contributions can be withdrawn at any time tax-and penalty-free. However, any Roth earnings must remain in the account until age 59½ or risk being subject to a 10% early-withdrawal penalty.

For additional long-term savings, consider holding low-cost investments, such as index funds, in a regular brokerage account that lets you withdraw money without penalties before age 59½. However, you will still need to strategize about covering the tax liability that comes with selling investments to fund your retirement lifestyle. One way to do so is by taking advantage of the tax benefits afforded by investing in a personal business or real estate.

Real Estate: Gersten recommends savers looking to retire early invest up to a third of their wealth directly in rental properties. This is a move both for diversification and tax management. Landlords can deduct mortgage interest, maintenance, and depreciation to help offset the cost of owning the rental property along with capital gains taxes incurred by selling investments from brokerage accounts.

Additionally, owning rental properties is similar to owning an annuity as opposed to buying real estate investment trusts that offer dividends. Rental properties can provide consistent cash flow that may help investors avoid drawing on their investment accounts and triggering capital-gains tax until well into the future. Being a real asset that has historically appreciated at price, a single property can potentially provide a source of income for the rest of an individual’s life and store its initial value securely with upside potential.

Hustle: Another way to diversify your income, minimize taxes, and ramp up your savings is to run a side business. This business can be of any kind, which would provide a similar mix of cash flow and tax benefits. Business owners can write off certain business expenses to offset taxes from other investments.

Gersten acknowledges that there’s no cookie-cutter formula for everyone. Some investors may feel like real estate is their golden ticket, while others may not be interested in being landlords or running a business.

The bottom line is to look for other types of assets and accounts so your future cash flow isn’t restricted to vehicles that are specifically designed for people targeting a more traditional retirement age.

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