retirement

6 signs that you are ready to retire early

Retirement »

No. 6: Your portfolio is big enough to withstand losses
Previous
6 of 6
Next
No. 6: Your portfolio is big enough to withstand losses © Preto Perola/Shutterstock.com

No. 6: Your portfolio is big enough to withstand losses

Because everyone's standard of living is different, there's no magic amount that automatically qualifies you for early retirement. That being said, a portfolio that is large and diversified by asset class can protect you in bad markets. If it's composed of different types of tax-deferred and tax-free assets, your portfolio is more likely to throw off enough income to sustain a long retirement than one that isn't.

"I tend to look at income that can be generated from a portfolio and use a 4 percent withdrawal rate. And I look at things like rental properties or business ownership that may generate other income," says Cummings. "In addition to that, we look at the potential for additional funds from business sales or inheritances and the size of the 401(k), deferred compensation plans, 403(b), pension, and guesstimate the amount of income that will generate when an individual turns 59 1/2."

One gauge of whether or not you are ready to retire is the amount you have saved as a multiple of your income. According to Fidelity Investments, you should have saved at least eight times your pre-retirement income by age 67 to ensure a secure retirement. If you want to retire earlier than that, you should probably shoot for more.

Previous
6 of 6
Next

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
Sponsor

Be An IRA Expert

Can I tap my IRA for a loan?

If you want to tap your individual retirement account for a loan, know the rules first.

CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Jennie Phipps

Why Obama’s plan is good for retirement

The president's proposed fiscal 2017 budget includes some provisions to encourage workplace retirement plans.  ... Read more

advertisement
Partner Center
advertisement

Connect with us