These days if you want to retire early then you might be thinking you’ll be done with work by age 30. Unfortunately, that’s not the reality for most of us. Most people will continue to work well after this hopeful milestone.
That said, you don’t have to work into your 60s or 70s either. There are things that you can begin to do today if you want to retire early. If you’re in your thirties now, then your best bet is to make an aggressive plan and stick to it.
Start Planning Now if You Want to Retire Early
Your retirement plan is the most important thing to focus on if you want to retire early. Many people lose this focus. For example, they want to retire early, but they also want to work now at a job that they love. Unfortunately, if the job that you love doesn’t pay well, then it doesn’t make for a good retirement plan.
Therefore, it’s critical that you set out all of your long-term goals today. Then break those goals down into year-by-year steps. Furthermore, don’t let anything in life take you off course from completing those steps. Of course, things do change, and you might need to revisit this plan over time. However, if you focus on a clear goal of early retirement, then you should have no problem sticking to the plan most of the time.
Invest in Your 401(k) and IRA
If you want to retire early, then you need to spend your 30s building up your 401(k). Ideally, you will choose to work with an employer who has a generous plan for matching contributions. If that’s the case, then you should definitely max out your contributions there.
If you don’t have an employer-supported 401(k) plan, then you need to do some serious thinking. Should you change jobs now in order to take advantage of this important opportunity? If not, then you still need a similar plan. Your best bet is an IRA. Make sure to look into:
- SEP IRA if you are self-employed or freelancing
- Roth IRA if you currently meet the income caps but expect to earn more by retirement
- Traditional IRA if the other two aren’t options for you
Note that you can open an IRA even if you have a 401(k). If you’re in a financial position to do so, then this is a great choice to help you retire early with maximum savings.
Unless you’re making a lot of money already, you can’t rely on savings alone if you want to retire early. You also have to invest your money. More importantly, you need to diversify your investments and invest aggressively.
On the one hand, you want to invest in tangible assets such as real estate that you will be able to hang on to over time. If you can pay off a house, then you have the added benefit of reducing your cost of living while investing in a long-term asset.
On the other hand, you also need to make investments that are a bit riskier but have the potential for a high payoff. In general, you want to balance safety, income, and growth with your investments. However, in your 30s, it’s smart to eschew a little bit of the safety in favor of more growth. Your best bet is to develop a strong relationship with an investor that you trust and allow them to help you make the most of your money.
Additional Steps to Take if You Want to Retire Early
If you aren’t already doing the following things then make sure that you start doing so in your 30s:
- Budget your money, reducing spending as much as possible.
- Make as much money as possible with passive income, second jobs, one-off gigs, etc.
- Pay off all debt including student loans.
- Steadily build up an emergency fund.
- Learn how to communicate about money with your partner.
- Start planning a college fund if you have (or plan to have) children.
- Get disability insurance and life insurance to protect you in the future.
Finally, be wary of excessive spending even on special events. For example, if you get married in your 30s, consider whether you really want to spend tens of thousands of dollars on a wedding when you could instead invest that money.