Please enjoy this guest post from Rick Pendykoski of Self Directed Retirement Plans LLC. All thoughts expressed are solely those of the author.

For most people, retirement planning is restricted to making sure they don’t have to worry about prescription medications, putting food on the table, or having a place to live in when they no longer have a job. But, if your plan is to finish early and retire rich, then you need to go beyond cutting costs and saving more.

Here’s what you need to do if you want the retirement of your dreams:

1) Start Early to Make the Most of Time + Compound Earnings

The key to retiring young and rich is to start early and invest as much as possible to tap the power of compounding interest. Despite this, most people who are strapped for cash assume they will make up for the time they are losing by maximizing their retirement savings later.

Here’s a hypothetical scenario to help you understand the magic of compounding interest over a long time period.

Harry is 40 years old and every year he puts $20,000 in his retirement account whereas Carrie is 21 years old and invests only $5,000 every year. By the time they both retire at the age of 65, they would have invested $400,000 and $220,000 respectively. Now, this is where the magic of compounding interest kicks in. Assuming they earn the same interest rate, even after investing twice as much as Carrie, Harry would have only half the money as her.

So, what do you learn from this?

2) Max Out Your Retirement Account

If you are not making the maximum possible contribution to your retirement account before the cut-off date, you are at a big loss – unless, of course, you are in your mid-50s and qualify for a catch-up contribution. Your retirement account allows you to enjoy tax-free growth where you not only avoid paying taxes on capital gains but also enjoy asset protection for amounts up to $1.25 million, depending on the type of IRA you have. Now you know why IRAs are such a big deal!

So, max out your annual contributions and reap rich dividends for life.

3) Use Your Employer’s 401(k) Match to Your Advantage

Most employers make a matching contribution based on your earnings and the contributions you make to your retirement account. If you are lucky enough to work for such a company, use this advantage to the fullest because it is practically free money!

4) Rollover to Avoid Taxes and Early Withdrawal Penalties

If you happen to hop jobs, the biggest mistake you can commit is cashing out your retirement savings. Always roll over your proceeds to your new employer’s 401(k) plan or to a rollover IRA in order to avoid both taxes and early withdrawal penalties.

Using a rollover IRA will also keep your cash working for you tax-free. Even if the amount is seemingly small, if you give it enough time to grow, it will surely get you closer to that early retirement. When done right, retirement planning can mean the difference between vacationing for life and taking up random jobs to support your lifestyle. So, be wise and rollover!

5) Find More Ways to Make Money

Cutting down on expenses is not enough if your dream is to retire rich. You need to create additional income sources today to maintain your standard of living during the golden years of your life. Shift your focus from cutting coupons and instead create a system that works to generate a steady source of income even while you’re asleep.

6) Keep a Check on Your Lifestyle

Once you enjoy a luxury, it does not take too long for it to become a necessity in your life. This explains why smartphones that never existed a decade ago have become an inseparable aspect of our lives today. So, as your income increases, your expenses will increase accordingly. Try automating your savings for long-term gains and keep your lifestyle in check by delaying instant gratification.

7) Monitor Your Portfolio Consistently and Make Adjustments

Retirement planning is incomplete without a monitoring system that lets you track your investments and make adjustments. Spot checks on the market will let you know when the market is vulnerable and how you are hitting your targets with time. Periodic reviews will also make it easy for you to determine if you can raise your targets or need to re-balance your portfolio’s allocation that has been thrown out of whack due to losses. Monitoring your portfolio is the best way to confirm that your asset mix is performing to your expectations and making the necessary progress toward a financially secure retirement.

8) Avoid the Debt Trap

Don’t let your desire of a primary residence drown you in debt. Keep your credit card purchases in check and make your payments on time. Having a mortgage on your primary residence is fine if it is less than what you would pay in rent. Use greenbacks for all payments except bills, as this could bring your expenses down by 20%. You get into the debt trap only if you let your Madison Avenue desires take over the actual, happy moments of life that come from family, relationships, and crazy experiences like screaming down a zip line!

9) Increase Your Investment Rate by 1% Every Year

There is a massive difference between saving and investing. The amount you invest in your retirement account while you are working will determine your lifestyle during your retirement. The amount that you need to save every month depends on your earnings and the age at which you start saving. Ideally, you should be putting aside at least 15% of your earnings every month while also raising the bar every year as your income keeps growing.

10) Explore the Most Profitable Assets with a Self Directed IRA

The best way to get rich before retirement is to place your money in a tax-favored retirement account that guarantees growth. A self directed IRA is not only the most flexible retirement account but also allows for a wide range of lucrative investments beyond stocks and bonds. With a self directed IRA, you can exercise checkbook control over your money, enjoy tax deductions for up to a year, and the best part – your growth is tax-deferred!

While a traditional IRA restricts your investment, a self directed IRA allows you to diversify your portfolio with investments that range from precious metals and private company stock to real-estate and tax lien certificates. Using a self directed IRA can open up new opportunities for growth that most people fail to grab simply because they are unaware of the benefits. So, if you want to expand the pie beyond stocks and bonds, setting up a self directed IRA is your best bet.

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpockets, SocialMediaToday, and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at rick@sdretirementplans.com or visit http://www.sdretirementplans.com/  Want to retire sooner and wealthier than your friends? Check out these 10 tips to help you build a retirement account that matches your dreams.