Make These Moves in Your IRA if You Want to Retire Early

They could really help you reach your goal.

Among current retirees, the average age to leave the workforce is 61, according to a recent Gallup Poll. But among non-retirees, the average expected retirement age is 66. In 1995, it was 60.

Now, the good news is that Americans are living longer these days, so retiring in your mid-60s might still mean having a good 20 years of retirement or more to enjoy. But you may want to retire earlier than that, and that's understandable. 

To pull off an early retirement, you'll clearly need to build up a lot of savings. Here are some essential moves for your IRA account that could lead you to your goal.

1. Max out retirement accounts

IRA contribution limits can change from one year to the next. This year, you can contribute up to $6,500 if you're under the age of 50, or up to $7,500 if you're 50 or older. And these limits apply whether you're funding a traditional IRA or a Roth IRA. 

Maxing out your IRA isn't an easy thing to do -- especially these days, given inflation. But if you manage to do so over an extended period of time, you might manage to amass enough cash reserves to pull off an early workforce exit.

In fact, let's assume today's IRA limits stay the same indefinitely. That shouldn't be the case, but it's easier for illustration purposes. 

If you max out your IRA between the ages of 25 and 60, and your investments generate an average annual 8% return, which is a bit below the stock market's average, you'll end up with a nest egg worth over $1.1 million. That could be enough to sustain you during a longer retirement.

2. Don't play it too safe

Many people are nervous about the idea of buying stocks. In fact, recent Motley Fool research found that 42% of Americans don't have money in the stock market at all.

But if you shy away from stocks in your IRA and limit yourself to safer investments, you might end up with a much lower long-term return on your money. In fact, the example above used an 8% return, which is reasonable for a 35-year stock investing window. If we cut that return down to 4% for a less risky portfolio, it results in a nest egg worth just $490,000.

That's still a lot of money. But it's not $1.1 million.

3. Diversify

The stock market can be very fickle, which explains why some people may be hesitant to invest in it. But if you diversify your portfolio, you may be more likely to ride out downturns and build up more wealth over time. 

There are different steps you can take to diversify your portfolio. One option is to put money into broad market ETFs. Another is to simply make sure you own stocks across a range of market sectors, like energy, tech, healthcare, and banks.

Early retirement is something a lot of people strive for. Make these moves in your IRA so you can actually pull it off.