Figure out what assets you have that produce income. And you might want to begin investing more aggressively, with investments that produce a greater rate of return.

If your home won't suit your retirement lifestyle, remember that the Taxpayer Relief Act of 1997 allows you in many cases to keep the capital gain when you sell the home, Abromovitz says. That money could help carry you through the first years of early retirement.

Step 3: Take advantage of tax-deferred opportunities
To secure the back-end of your retirement, maximize the money you put into your retirement fund, says Ileen Malitz, certified financial planner and author of The Modern Role of Bond Covenants. She stresses starting a 401(k) and a Roth IRA from day one of employment.

"If you're willing to enroll in a 401(k) you're taking a major step to retiring early," Abromovitz says. "401(k)s and IRAs are can't-lose situations as long as you continue investing in the long haul. You take advantage of tax shelters and compounding for decades by doing so. So it's hard to go wrong."

Putting money in an IRA does not mean paying penalties if you go fishing earlier than planned. For the purpose of early retirement, you can withdraw from your IRA if you take advantage of the annuity payout.

Step 4: Invest it
The third place to stick your left-over money is in non-tax sheltered mutual funds. Figure out where to invest it so it produces a decent return. Look in the mutual fund column of the newspaper for funds with no custodial fees and no commissions, known as loads.

"It's best to combine it into a money market that earns good interest and stock mutual funds. It will be taxable, but it still is probably the best place for it," Malitz says.

While mutual funds outside an IRA or 401(k) may not be tax sheltered, they can be tax efficient. In the case of mutual funds, this means the fund managers buy and sell the fund's assets with an eye to tax consequences.

No matter where you invest your money, your best bet is to do it on a regular basis. "For people who don't find it easy to save, the best thing to do is to get into an automatic investment program," Abromovitz says. A fixed amount such as $50 to $100 is deducted from your paycheck monthly and invested in mutual funds. The result is dollar-cost averaging, which means you buy more shares when prices are low and fewer when prices are high.

Abromovitz says the last thing a would-be retiree should consider is investing on hot stock tips: "To me, you should have all of these solid investments first. If you hear about something, it should be money you're ready to lose. It should be a lower priority."

Step 5: Stick to your plan
Early retirement requires a long-term savings and investing plan, and it takes discipline. This means keeping debt down and perhaps not living as lavishly now, so you can reap the benefits later.

You make a choice between lifestyle and high wealth accumulation. If you want wealth accumulation, you have to live a modest lifestyle. It has to be a written, conscious choice.

Time is on your side. The earlier you start and the longer you leave your money untouched, the more compounding can work for you.

When you haven't saved, it's hard to go back and make up for it. Malitz says the easiest thing is to decide to save 10 percent of your income. You'll probably never miss it.

-- Updated: Feb. 26, 2004