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!
