Did you know that Americans typically retire before age 65? But what’s surprising is that it’s not because their finances are so good that they can afford it.
The average retirement age is 62, and the main reason retirees retire early is because they have to. Health problems, disabilities and factors beyond their control are the top reasons Americans retire early, according to a recent study from the Employee Benefit Research Institute.
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Ideally, people would retire early because they can afford to, and not because they are forced to do so by factors beyond their control that could lead to more stressful retirement years. One way you can put yourself in a stronger financial position and retire earlier, because your finances allow it, is by investing your savings. And there are two exchange-traded funds (ETFs) that can help you do just that: the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the Vanguard Total Stock Market Index Fund ETF (NYSEMKT: VTI).
A fund that reflects the S&P500 (SNPINDEX: ^GSPC) can be a great investment because it gives you exposure to the best stocks in the market, including Apple And Microsoft. And the Vanguard S&P 500 ETF has a light expense ratio of 0.03%, which ensures fees don’t eat up a large portion of your profits. With an average market capitalization of over $260 billion, you don’t run much risk with volatile investments in this type of ETF. Therefore, it can be ideal for long-term investors who just want a fund to put money into. on a regular basis.
Over the past ten years, the fund has achieved a total return, including dividends, of approximately 250%. That equates to a compound annual growth rate (CAGR) of 13.4%, which is higher than the S&P 500’s long-term average of about 10%. Over the long term, that price could fall, especially with many growth stocks currently trading at high levels. However, with excellent diversification and room for the fund to help you achieve significant long-term returns, this can make for a solid investment that can help you retire early.
A more diverse fund to hold is the Vanguard Total Stock Market Index. It contains over 3,600 stocks and also has a low expense ratio of 0.03%. By giving investors exposure to large-, mid- and small-cap stocks, there is even less risk to individual stocks than with a fund that mirrors the S&P 500.
