5 Ways to Retire At 30

Most people spend don’t retire until they reach their mid-60s. To make matters even worse, the average retirement age keeps getting older. Between 2004 and 2010, most people retired around age 60. As recently as 2018, though, most Americans said that they didn’t plan to retire until age 66.

Is it even possible to retire at 30? Reaching that goal takes a lot of discipline, but it isn’t impossible. You can improve your chances of retiring young by following these five plans.

Max Out Your Savings

Let’s say you enter the workforce at age 21. During the years between high school and starting your career, you learned skills that help you earn a good salary. Maybe you started out at $85,000 and average $125,000 per year over a decade. (To keep the numbers simple, let’s assume these are post-tax amounts.)

If you max out your savings, you could have as much as $625,000 ready for retirement at age 31, excluding any investment gains.

Obviously, saving half of your income will require exceptional discipline. To reach that goal, you can only spend money on bare essentials. You’ll wear inexpensive clothing, live in a small home, drive an older car, and eat homemade meals three times a day.

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Most people in their 20s don’t live this way. Instead, they splurge on extravagances by socializing in clubs, going out to eat, and wasting money on cars they cannot afford. Sure, they have fun. But they will end up working decades longer than the person who puts saving first.

Essentially, you’re delaying satisfaction by a decade. Once you retire in your 30s, all of that sacrifice will seem worth it. While the rest of your peers scramble to catch up, you’ve already made your money and started to enjoy every hour of your life.

Max Out Your 401k Savings

Maxing out your 401k savings will also make it much easier for you to retire young, especially if you work for a company that matches a percentage of your contributions.

The maximum 401k contribution changes each year. In 2020, you and your employer could add up to $57,000. In 2021, the contribution limit increased to $58,000.

How you reach this goal will depend on how much money you earn and how what percentage your employer will match. Some companies will match your contributions dollar to dollar. That means you can max out your 2021 401k savings by contributing $29,000. That’s an incredible deal!

Not many employers are that generous, though. For example, some companies will match 50% of your contributions up to a certain amount ($5,000 is a pretty common amount). Even though your employer puts less into your account, it still pays to max out your 401k.

On average, you can expect your 401k to undulate with the stock market. History indicates it should compound over time, though, so the money grows quickly.

For simplicity, let’s assume the maximum contribution stays at $58,000. That way, you will get a low estimate of your account’s value. It’s better to underestimate than overestimate. With a 9.5% interest rate that compounds annually, you would have about $905,500 in your account by the end of the decade. That’s a lot of money, though admittedly 9.5% is a stretch to expect each year.

You can use a 401k calculator to estimate amounts based on what you expect to contribute. Play with the variables to see how much you can realistically earn.

Budget, Budget, and Budget Some More!

Budgeting makes every other part of your early retirement plan possible. If you plan to max out your savings and 401k contributions, you need to know how every penny gets spent and probably won’t have a lot of wiggle room. You have a goal, and everything else must serve that goal.

Most people can find plenty of “low-hanging fruit” expenses to cut. Some of the easiest ways to lower your expenses include:

• Eliminating subscription services like Netflix and Spotify (especially the ones you don’t use often).
• Comparing car insurance quotes to choose cheaper options.
• Riding a bike or choosing another low-cost cost for commuting.
• Eating meals at home instead of paying inflated prices at restaurants.
• Finding hobbies that save money instead of forcing you to spend money (gardening and crafting are great examples).
• Using less electricity and other utilities to lower your monthly bills.
• Buying a home that’s appropriately sized for your needs.

After you cut those expenses, you can look for more difficult sacrifices that will help you retire young. It’s not an easy process. You will feel the benefits when you’re relaxing on a beach while everyone else is at work.

Invest in Growth Stocks

Invest in companies that have the possibility to give you tremendous returns. Growth stocks have the potential to gain enormous value, so you gain wealth as the companies grow.

It’s also worth looking into stocks that pay dividends. Before retirement, reinvest those dividends so you can purchase more shares. After you retire, you can either sell your shares or keep them to live off the dividends. Of course, you could sell some shares and keep others for a steady stream of money.

Keep in mind that growth stocks often have high risks. You want them in your portfolio, but you can’t rely on them solely. Make sure you add some balance by investing in companies that have shown the ability to maintain market dominance over decades. You want their certainty to protect you from sudden movements in the stock market.

Calculate Your Spending Needs

Do you know how much money you will need to retire? If you quit working your full-time job during your 30s, you will probably need enough money to cover your lifestyle for four decades or longer.

When calculating your spending needs during retirement, consider:

• The cost of housing (you might want to choose a location with a low cost of living).
• How much you might need to spend on healthcare as you age.
• Car payments.
• The ongoing costs of raising children.
• Monthly bills.
• Inflation.

You can’t predict everything about the future, but you can make some rough estimates to prepare for it. Consider that you didn’t spend a decade of your life working hard and saving every dollar just so you could sit and do nothing. You will want to enjoy life… and that often gets expensive, especially when you like traveling).

Always overestimate the amount of money you will need during retirement and underestimate the amount of money you will make from saving and investing. That approach will help ensure that you have enough money to live well during a long retirement.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.