5 Key Signs Early Retirement Is Within Reach for Millennials and Gen Z
Written by
Nicole Spector
Edited by
Chris Cluff
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Millions of Americans hope to retire early — and many are able to, but this ability doesn’t arise out of thin air. To retire early, you need to be incredibly strategic around your professional and financial life.
If you’re a Gen Z or millennial with your heart set on an early retirement, you may be wondering, “Am I doing everything I’m supposed to be doing to make this happen? What are the signs that I’m on the right track to an early retirement?”
Keep reading to find out.
You’re Saving the Right Percentage of Your Income
According to T. Rowe Price, people looking to retire at around age 65 should have savings totaling between seven and 13.5 times their preretirement gross income. If you’re a high earner or are looking to retire earlier, say, at age 60, your savings strategy should be more aggressive.
You’re Making Smart Moves at Work
One of the smartest things you can do in your professional life is to take advantage of any and all retirement savings plans and employer matches that your company offers. If you’re already doing this, you’re setting yourself up for success.
You’re Not Banking Too Much on Social Security
Currently, Americans are entitled to Social Security benefits at the age of 62, which is ahead of the full retirement age of 66 or 67, depending on when you were born. But the Social Security program is not in great shape. According to the Social Security Administration, benefits are expected to be payable in full on a timely basis until 2032, when the trust fund reserves are projected to become exhausted. In 2032 and beyond, Americans may stand to receive only partial benefits.
And even if Americans could fully trust Social Security, it’s an awfully small amount of money to get by on. To be on track for an early retirement, it’s critical not to rely on Social Security as a windfall to carry you through your golden years.
You Have a Fund for Medical Expenses
Medical debt can sink any American, but young retirees, who will most likely have to foot their own insurance given that they can’t apply for Medicare until they’re 65, are especially at risk. Make sure you have an ample fund set aside for medical expenses that could arise later in life. If you’re eligible, investing in a health savings account (HSA) is also strongly recommended, as you can tap into these pre-tax savings to pay qualified medical expenses at any time in your life. The funds never expire. However, HSAs are only available to individuals with high-deductible health plans.
You’re Already Living Below Your Means
Retirement can be long desired and then suddenly shocking because even if you have a nice savings plan, you’ll probably have to live below what you made in your working years. The earlier you can practice doing this, the better. In this vein, you’ll want to be conscious of moves you can make to further reduce unnecessary spending, such as downsizing or relocating to an area with a cheaper cost of living.
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