retirement

6 signs that you are ready to retire early

Retirement » 6 Signs That You Are Ready To Retire Early

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

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.

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