Early retirement requires you to build assets faster. Losing compound growth as a wealth building tool due to the shorter time-frame of early retirement requires you to add a non-conventional dimension to your plans. You must apply one or more of the following three principles:

1. Extreme Frugality: This is defined as being an extraordinary saver with low expenses relative to income. Some people have been known to save more than 70% of their earned income to retire in 7-10 years. It’s possible, but it’s not everyone’s first preference, so let’s look at two other alternatives. Available in RESONANT CASHFLOW NETWORK
2. Active Investing: This is defined as adding a skill component to your investment strategies, which creates an additional return stream above and beyond passive returns. The higher investment return amplifies and accelerates the compound return. You can learn more about active investing here. Available in RESONANT CASHFLOW NETWORK.
3. Leverage: This is defined as expanding your resource base beyond your own limitations. Leverage allows you to replace less time with more resources, thus multiplying what you can achieve in the same amount of time. Available in RESONANT CASHFLOW NETWORK.

4 BASIC RULES YOU MUST UNDERSTAND IN RETIREMENT RACE.

It would be an impossible task using the traditional models, but it’s actually rather simple to accomplish using a simple three rule system I developed.

(1) The first rule is you must build an investment portfolio sufficient to throw off residual income in excess of personal expenses. Please note this doesn’t refer to total return, but only to residual income. You can only spend the income thrown off by the assets, but the assets themselves can never be touched. This distinction is critical.

When the cash flow from your portfolio is more than you spend on living expenses, then you are infinitely wealthy. No complicated math required. At this point, your life expectancy is irrelevant because you can never outlive your income, making the expected lifetime assumption irrelevant.

(2) The second rule is you must manage your assets so that growth (total return-income) is greater than the inflation rate. This takes care of the inflation monster.

For example, if your income comes 100% from a laddered bond portfolio, then your growth is zero because total return and income roughly equal each other over time. This means that over the long-term, the inflation monster will likely eat your all-bond portfolio for lunch when you live off the income. Not a good thing.

Alternatively, if your cash comes from appreciating assets like properly valued dividend paying stocks, and positive cash flow rental real estate, then over time, those assets are likely to grow with inflation and your income should likewise grow.

As long as the difference between your total return and the income from your assets exceeds the rate of inflation, you can remove any need to estimate future inflation from your calculations. It becomes a non-issue.

(3) The third and final rule is your residual income must come from multiple, non-correlated sources. A reasonable mixture of dividend paying stocks and income producing real estate would satisfy that requirement.

It’s also possible to mix in some passive business income, fixed annuity income, royalty income, social security income, and pension income.

What you don’t want to do is retire based on one source of income. For example, many airline employees retired solely on their pensions which got decimated when certain airlines went through bankruptcy and restructuring. They had no fallback position and had to cut their lifestyle, and/or go back to work.

“There can be no real individual freedom in the presence of economic insecurity”-Chester Bowles

(4) A fourth bonus rule also exists, but it isn’t necessary. Think of this bonus rule as an insurance policy against the unknown factors in life ruled by Murphy’s Law.

Don’t begin early retirement until your passive investment cash flow exceeds what you spend. This will ensure you have money left over to reinvest.

This provides the last added measure of insurance to cover against unexpected surprises, lost income due to default, catastrophes, excess inflation, etc. Reinvesting excess revenue allows you to compound your way to recovery over time from any adverse circumstance.

There you have it – four simple rules, with no arcane assumptions or calculations, that simplify how perpetual financing for early retirement works. It doesn’t matter how early you retire or how long you live. As long as you adhere to these four simple rules, perpetual financial security should be yours throughout retirement.

THE EASIEST WAY TO SAVE FOR RETIREMENT.

If you have problems saving for retirement this calculator offers an easy solution - periodic spending. Small, regular payments like your daily fancy coffee at Starbucks, the storage locker fee to hold your junk, and the magazines you don't read can all fund a secure retirement. Try it yourself and see!

For example, just input $5 daily for coffee at 10% interest for 40 years. You'll be shocked. Now try 12% - but make sure you are sitting down first. To complete the exercise simply examine all unnecessary periodic spending in your life, plug these expenses into the calculator using your expected remaining lifetime (assume age 100 or 90) as the number of years, add up the totals, and you will discover the simplest, most certain way to save for retirement.

The wakeup call this calculator teaches is the true cost of spending is the compounded interest you lost over many years - not the actual money you spent. That is the key principle.

A few things to keep in mind:

• Try using an easy round number like 10% to approximate the long-term historical return from stocks.
• If you invest your savings in paying off high interest debt, you could earn an even better return.
• Be sure to include any sales taxes that might apply when entering expenditure amounts.
• Some items you buy come with additional costs of ownership -- such as repair and maintenance costs, operating costs (gas, electricity, etc.), insurance costs, storage costs, etc..
• The calculations do not account for inflation.
• Forgone interest is compounded on a monthly basis and forgone purchases are invested at the end of each spending period.

How Much Do I Need To Invest For Retirement?

How much you need to invest for retirement depends on when you start saving and how big your retirement budget will be.

If you make some rough assumptions including that your retirement budget will be 80 percent of your pre-retirement, pre-tax income, that you’ll live roughly 30 years in retirement, start with zero savings, and get average historical investment returns, then below are some rough guidelines to match those rough assumptions.

Please recognize, however, that these guidelines are REALLY rough:

• If you start saving in your 20’s then consider 10-15% of your income.
• If you start in your 30’s then save 15-25% of your income.
• Waiting until your 40’s for retirement investment makes it much more difficult at 25-35% of your income.
• The numbers for starting in your 50’s are likely unattainable for someone who hasn’t shown a lifetime a saving habits and frugality – roughly 60% of their income.

Two conclusions are obvious – the earlier you start saving the easier the goal is to attain, and the earlier you retire the harder the goal is to attain. Using this retirement investment calculator allows you to fix your time period and easily calculate how much you need to save. It makes the math easy for you.

Why Do I Need A Retirement Fund?

Unless you plan on being indigent or dependent on charity, there really is no choice.

You must build your retirement savings now to support your lifestyle needs when you are no longer employable (due to old age) or lack the energy to earn a living. Sad but true.

Additionally, nobody want to be a burden to their family when they get old. It represents a loss of dignity and shows everyone that you were not responsible in planning for your financial future. Building a nest egg is the only reliable solution.

The alternative of relying on a government pension system (like Social Security) is no plan at all. The income from these pension funds is designed for subsistence only and does not allow for comforts, travels, or medical emergencies.

The reality is you either plan for your retirement by saving now, or you are planning (by default) to lose your freedom and independence when you become elderly.

The choices are straightforward. Would you rather have a hefty tax deduction today by funding your retirement accounts and building your financial security for tomorrow, or would you prefer to spend a little more today and risk losing your dignity and freedom tomorrow?