Retiring early is a dream for many people. The idea of leaving the 9-5 grind and pursuing your passions full-time in your 30s is certainly appealing. But is it actually possible to retire that young? Let’s take a look.
Is Early Retirement Realistic?
Retiring in your 30s is possible, but it’s not easy or common. Very few people have the means to stop working and rely on savings and investments that early. You would likely need at least $1 million saved to generate enough passive income to support yourself for decades of retirement. Most 30-year-olds simply haven’t had enough time to accumulate that level of wealth.
That said, early retirement doesn’t necessarily mean you stop working completely. Some achieve “financial independence” in their 30s, meaning they have enough passive income from investments to cover basic living expenses. At that point, you don’t need a job for income and can work optional side jobs or gigs you enjoy. So it’s possible to “retire” from the corporate grind even if you still work in some capacity.
How Much Money Do You Need?
To retire in your 30s, most experts recommend having at least 25-30 times your anticipated annual expenses saved. This is known as your “FIRE number” in the FIRE movement (Financial Independence, Retire Early). So if you estimate needing $40,000 per year to cover costs, you’d aim to have $1 million saved.
Of course, the actual FIRE number depends greatly on your spending habits and desired lifestyle. If you plan to maintain an expensive home and travel frequently, you may need closer to $2-3 million saved. But those willing to downsize and budget can get by on much less.
Factors that influence how much you need:
- Annual spending – The less you spend, the lower your FIRE number can be.
- Cost of living – Retiring in a LCOL area cuts expenses.
- Debts – Entering early retirement debt-free is ideal.
- Healthcare – Retiring before 65 means paying for your own health insurance.
- Kids – Children increase retirement costs significantly.
How to Save $1 Million by 30
Saving $1 million in just a decade requires diligence, discipline, and sacrifice. Here are some key strategies:
Earn more
Making more money gives you more to invest and speeds your savings rate. Consider:
- Asking for promotions and raises at work
- Freelancing on the side
- Starting a business while keeping your day job
- Furthering your education to increase earning potential
Spend less
Reducing expenses frees up more cash to put towards early retirement. Tips include:
- Live with roommates
- Drive an old car
- Limit dining out
- Cut the cable cord
- Avoid lifestyle inflation as income rises
Invest aggressively
Growing investments rapidly accelerates your path to $1 million. Strategies include:
- Investing 15-25% of your income
- Maxing out retirement accounts like 401(k)s and IRAs
- Using a high stock allocation while you’re young
- Utilizing tax-advantaged accounts
- Letting gains compound over time
Starting to invest in your 20s gives you a significant head start on hitting your FIRE number thanks to compound growth over time.
Make Additional Money
Earning extra income from side hustles can really move the needle. Possibilities include:
- Renting out a room on Airbnb
- Driving for Uber or Lyft
- Starting a YouTube channel
- Selling products on Etsy
- Walking dogs through Rover
- Monetizing a blog
Think creatively about ways to put your skills and passions to work for added income. Every bit helps shorten your retirement timeline.
Use Windfalls Wisely
Coming into unexpected money like an inheritance or bonus can turbocharge your early retirement savings when utilized properly. Options include:
- Paying off high-interest debt first
- Adding lump sums to investment accounts
- Avoiding lifestyle inflation
- Adjusting your retirement timeline and increasing savings rate
View windfalls as an opportunity to get closer to financial independence, not as an excuse to spend freely.
Have a High Savings Rate
Maximizing savings is key if you want to retire by 30. Financial experts often recommend saving at least 50% of your after-tax income. This table illustrates how saving rate impacts time to retirement:
| Savings Rate | Years to Retirement |
|---|---|
| 20% | 45 |
| 40% | 22 |
| 60% | 15 |
| 80% | 11 |
As you can see, raising your savings rate can dramatically shorten the time until you reach financial independence.
Be Willing to Make Lifestyle Sacrifices
Retiring decades earlier than the norm requires some degree of sacrifice. You’ll likely need to seriously restrict spending on:
- Housing – consider downsizing or having roommates
- Transportation – buy used cars and use public transit
- Food – cook at home and limit dining out
- Travel – vacation less extravagantly
- Shopping/Entertainment – develop low-cost hobbies
If a luxurious lifestyle is a priority in your 30s, early retirement may not be feasible. You have to decide what’s more important to you.
Choose a Low Cost of Living Area
Location has a huge impact on how far your money goes. Retiring in an expensive city like San Francisco or New York makes achieving FIRE extremely difficult. Smaller towns and rural areas generally have much lower costs of living. Relocating to locales like:
- Midwest – OH, IN, MO, IA, KS
- Southeast – TN, NC, SC, GA, AL
- Southwest- TX, OK, NM
- Northwest – ID, UT, WY
Can let your savings stretch much further and make early retirement more feasible. Just be sure to factor in any costs of relocating such as breaking a lease.
Have Supportive Relationships
Trying to achieve FIRE on a single income while raising kids is extremely difficult. Having a spouse or partner who also contributes financially and shares your savings goals makes a huge difference. Even simple things like them being willing to downgrade your home or take staycations can tremendously help accelerate retirement timelines. It’s challenging to retire very early if your significant other still plans to work a typical career.
Understand Your Healthcare Options
One major cost that early retirees have to plan for is health insurance. If you leave an employer before 65, you lose access to company plans and subsidized group rates. Options include:
- Getting on a spouse’s plan
- Enrolling in COBRA for 18 months (expensive)
- Buying private insurance (likely $300+ per month)
- Using an ACA exchange plan
- Joining health sharing programs
Understand all the costs and coverage before making the leap to retire early without employer insurance.
Have Multiple Income Streams
Early retirees generally utilize more diverse income sources compared to traditional retirees who rely heavily on 401(k)s and pensions.Having multiple income streams creates more stability and reduces risk. Options include:
- Dividends from stocks/funds
- Real estate crowdfunding
- Royalties from online courses/books
- Profits from websites/blogs
- Rental property income
- Freelancing or consulting
The more places your passive income is coming from, the more secure your early retirement will be.
Be Flexible and Adaptable
Life never goes exactly according to plan. Your investments may underperform or unexpected expenses could come up. Having flexibility built into your plan helps early retirement succeed. Be prepared to:
- Lower your spending if markets underperform
- Have a side income source as a backup
- Delay full retirement by a few years if needed
- Relocate to further reduce costs if necessary
Early retirees need to be willing to make ongoing changes to ensure their money lasts.
Conclusion
Retiring in your 30s is an extremely ambitious goal that requires intense focus and sacrifice. While far from easy, it’s definitely achievable for the determined saver willing to optimize their earning, cut expenses, and invest aggressively. With diligent effort, retiring decades before the norm could be a reality.
The key factors are: securing a high income, maintaining an ultra-high savings rate, pursuing creative side hustles, maximizing investments, cutting costs, and being flexible. If you develop multiple streams of passive income and are disciplined about minimizing expenses, you could be joining the ranks of early retirees.