Early retirement is all the buzz in the financial world lately. It seems like everywhere you turn there is someone who is smarter, faster, and hustling harder than you are. And on top of that, they’re planning on retiring decades ahead of you. Obviously, they didn’t screw up like you did and they must’ve had the inside scoop from the day they were born – a whoppin’ 30 years ago. Okay, okay, before anyone blows a gasket and starts calling me a hater, I want to make myself clear. I absolutely LOVE the fact that there are 30-somethings out there retiring. But, I also want to talk about how feasible it is to retire in your 30s and what it takes to actually get there.
Can You Really Retire In Your 30s?
The short answer is a resounding YES, and there are plenty of personal finance bloggers out there who have done it! Mr. MMM and I are unfortunately NOT included in that exclusive and elusive group – we were way too busy screwing up in our 20s to realize early retirement was even an option. You can read all about our disastrous past here!
But to be fair to us, I don’t think early retirement was an option when we were in our 20s. I mean, of course if we would’ve had the foresight and ambition to blaze a new, non-traditional trajectory, we could have accomplished it. Interestingly though, the concept of early retirement hadn’t yet exploded onto the mainstream scene when we were flashing our IDs at the bars and taking out student loans. Social media was also in its infancy, so even if there were a few people chattering about their awesome financial accomplishments, it wasn’t common knowledge and certainly didn’t reach us. Of course, in our opinions, our inability to retire in our 30s is strictly due to the fact that we were ill-informed Gen-Xers. Womp. Womp.
What It Takes To Reach Early Retirement In Your 30s
Now that we’ve established that it is indeed possible to retire in your 30s, let’s take a look at what it takes to actually get there. Most of the people who have done this and are doing this earn above average salaries, keep their living expenses extremely low, and invest a significant amount of money each month over the course of years. Let’s examine each one of these key ingredients:
Key Ingredients To Retiring In Your 30s
Couples: It’s not unusual for wicked-early retirees to be coupled/married. Let’s face it, we all know living together is cheaper than living singularly. And if you have two people earning above average salaries (see next point), you are bound to build wealth at a rapid pace.
Above Average Salary: An above average salary is almost a must to be able to retire as early as your 30s. When I say above average, I’m not saying you need to be making doctor’s wages – although that would help! But, anything less than high five figures means you’ll probably be working and saving at least into your 40s, which by the way, is still REALLY good!
Living Expenses: People doing this in 10 years or less are also living below their means – way below their means. Oftentimes, they live in a low cost-of-living area. They frugalize everything from housing to haircuts. And they do it over the course of YEARS. You up for that?
Savings Rate: Their savings rate usually hovers between 50 and 70% of their take-home pay. That means they’re saving up to 70% of their pay after taxes and 401(k)/IRA contributions. Yeah.
Kids: It’s not unusual for 30-something retirees to be kid-free. That’s not to say some don’t have kids or aren’t planning on it. Some plan for children after they hit their goal – or not at all.
Fortunately, Mr. MMM and I fall into the above categories. Unfortunately, we will never hit the early retiree status in our 30s, since we didn’t even know each other until a few years ago. And that’s okay. We’ll hit it in our 40s. We won’t be making headlines or making any reporters salivate, but we’ll still be decades ahead of schedule. #Winning
Various Other Things You’ll Have To Get Right To Retire In Your 30s
Choosing A Partner: You won’t have time to hop in and out of relationships. To maximize your earning power in your 20s you’ll need to choose a partner that shares your financial aspirations. It would also be a huge plus if that partner is a high-earning partner.
Avoid Debt: People who retire in their 30s also avoid debt of any kind. You’ll need to steer clear of student loans, credit cards, cars, etc.
Start Young: In order to retire in your 30s, you need to start your journey as soon as your college degree lands in your hands.
How Much Money Do You Need?
Let’s assume you’re interested in heading down the path to financial freedom decades before social norms expect you to check out, you need to run your numbers. Most financial advisers will tell you that you need to run your calculations based on your earned income – that is simply not true. What you need to do is run the numbers based on your living expenses.
For example, if you’re earning $100k/year and only need $35k/year to pay all your expenses, with some fun money to boot, that’s the number you need to use for your calculations. The general rule-of-thumb is that you need 25x your annual expenses (not salary) invested to be able to retire and employ a safe withdrawal rate to live off of your investments indefinitely. The safe withdrawal rate is the percentage you can safely liquidate each year to have your money last you the rest of your life. Financial experts tend to recommend a safe withdrawal rate between 3 and 4% – check out the Trinity Study for the actual research.
Can You Really Retire In Your 30s?
The question persists, is it really feasible to retire in your 30s? I’d say it is possible, but not probable. I know it isn’t feasible for us; we’ll never be that Yahoo headline. But, it could still be possible for you! All it takes is the right combination of youth, determination, and financial finesse.