Want to Retire Early? Do These Things in Your 20s and 30s

A lot of people dream of retiring early, whether it’s so that they can travel, pursue hobbies, or simply live life on their own terms. If your goal is to retire early, it’ll take a commitment from a young age. And if you make these moves during your 20s and 30s, you’ll put yourself in a stronger position to manage a workforce exit on your preferred timeline.

1. Live below your means

It’s easy to go overboard on spending when you first start working and begin enjoying the benefits of a steady paycheck. But if you want to retire early, you’ll really need to get into the habit of living below your means and not spending down your entire paycheck month after month.

In fact, a good bet is to keep your largest monthly expenses, like housing and transportation, as affordable as possible. That means buying a smaller home even if you can swing the mortgage a larger one might require, and driving a basic car instead of a higher-end model. The less you spend on living costs, the more money you’ll be able to allocate toward your long-term goals.

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2. Save consistently

If you want to retire early, you’ll need a generous nest egg to make that possible. First of all, if you leave the workforce at a young enough age, you may not yet be eligible for Social Security. But also, you’ll need income outside of those benefits to cover your costs, and that’s where your personal savings come in.

When it comes to growing wealth in your IRA or 401(k) plan, time is the most effective tool you have at your disposal. And that’s why it’s important to start funding your retirement account from the moment you begin collecting a paycheck.

3. Invest aggressively

If you want to grow a lot of wealth in your IRA or 401(k), you’ll need to get aggressive with your investments. That generally means loading up on stocks for more generous returns — even if that means stepping outside your comfort zone if your tolerance for risk isn’t all that high.

Let’s imagine you want to retire at age 52, and so you start funding your 401(k) at age 22 in the amount of $1,000 a month. If you load up on stocks, you might generate an average annual 8% return, which is a bit below the stock market’s average. And that will, in turn, leave you with a nest egg worth about $1.36 million.

But watch what happens if you play it safe. If you go more bond-heavy in your portfolio, you might cut your average annual return in half. The result? A nest egg worth $673,000, which is still a lot of money, but perhaps not enough to retire at a notably early age.

It can be done

It’s more than possible to pull off an early retirement — if you commit to that goal early on. Make these moves during your first two decades in the workforce so you can close out your career when you want to.

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