Retiring at Age 30, 40 or 50? What You Need To Know

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With careful planning, diligent saving and good investment choices, retiring in your 50s is definitely a possibility. But if you subscribe to the beliefs of the “financial independence, retire early” movement, also dubbed “FIRE,” then retiring in your 40s or even your 30s should be the goal.

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While this isn’t for everyone, it is a possibility for certain select individuals. But if you adopt this type of lifestyle, you’ll have to understand what you’re getting into — and what you’re giving up.

Here’s a look at some of the most important things you need to know if you plan to retire in your 30s, your 40s or your 50s.

Retiring at Age 30: What You Need To Know

Retiring at 30 was something that until recently most Americans would have thought impossible, short of picking a winning lottery ticket or being the lucky recipient of a large inheritance. But a number of factors, from changing workplace dynamics to zero-commission online investing, have contributed to the idea that retiring at age 30 is not only possible but desirable.

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The truth is that, except in very rare cases, retiring at 30 is still nearly impossible. But if you want to set this as a goal, here’s what you’ll need to accomplish.

How Much Should You Have in Savings?

Proponents of the FIRE movement understand that to retire early, at any age, you’ll have to boost your savings and investment rate to levels that are unrealistic for many people. While you might be familiar with the age-old advice to save 10% or 15% of your income for retirement, if you want to retire at age 30, you’re looking at saving more like 75% of your income. Even at these levels, success is far from guaranteed.

Let’s imagine that you’re in good health with a strong family history of longevity and you think you might live until age 95. If you retire at age 30, that means you’ll have a whopping 65 years of retirement ahead of you. Not only that, but you’ll have maybe 10 years or less to earn all of that money, since your work career will be cut dramatically short.

If you’re going to live 65 years after you retire at age 30 and you want an above-average annual income of $60,000, you’ll need $3.9 million to make it on a strictly arithmetic scale. But, if you invest your savings using a feasible 5% average annual return, you’ll need closer to $2.15 million. This factors in a 3% annual increase in withdrawals to keep up with inflation and the proviso that projecting out investment and inflation returns for more than 60 years inherently involves a high level of uncertainty.

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What Mistakes To Avoid Making?

One of the things that gets overlooked when retiring at age 30 is that you may not qualify for Social Security. You’ll need to earn 40 “quarters of coverage” to qualify for benefits, and that means 10 years of work.

Even if you qualify by starting to work at age 20 or younger, your benefits likely won’t amount to much. Even if you earn the maximum amount possible over those 10 or 12 years, the Social Security Administration uses your 35 highest years of earnings to calculate your benefit. As 25 or more of those years will show zero earnings, your benefit likely will be small.

Another often-overlooked factor is how the compounding power of inflation will work against you. If you retire at age 30, inflation will continue eating away the buying power of your savings for more than half a century. Even at a relatively modest 3% inflation rate, by the time you are 70, prices will have more than tripled. By the time you reach 80, you’ll be facing prices that are more than quadruple current levels.

Retiring at Age 40: What You Need To Know

Retiring at age 40 is much more realistic than taking that big step at 30, but it’s still a stretch for most people. You’ll still have to subscribe to the idea of saving more than 50% of your income and making wise investments along the way. 

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How Much Should You Have in Savings?

Using the same assumptions above, on a linear scale, you’ll need $3.3 million in savings to reach your goal. But if you invest your money at a 5% rate from age 40 until 95, taking out an inflation-adjusted $60,000 annually along the way, you’ll need closer to $2.2 million. This is less than needed at age 30 because you’ll have fewer years of withdrawals and more time for your investments to compound their return.

What Mistakes To Avoid Making?

Some would say that retiring at age 40 is its own biggest mistake, as you’ll be stepping out of the workforce right when your earnings are likely to get turbo-charged — and your expenses are likely to be increasing. Between mortgage payments, child-rearing and college expenses, your monthly budget can easily get out of control.

As you’ll essentially be living on a fixed income, it’s important to factor all of these variables into your equations before you make the decision to retire early. The figure above is only a guideline.

Retiring at Age 50: What You Need To Know

Retiring at age 50 is actually quite doable for those who are dedicated to achieving this goal. However, it’s still important to know that while 50 may seem “old” if you are 20, it’s still nearly two decades earlier than full retirement age for Social Security purposes. 

How Much Should You Have in Savings?

Using the same assumptions above — living until age 95, earning a 5% annual return in a 3% annual inflationary environment and requiring $5,000 per month to live at the start — you’ll need about $1.75 million in savings.

As expected, since your retirement period will be shorter, you won’t need to save as much as if you retired at age 30. And this sum will be much easier to acquire, since you’ll have another 20 years of income under your belt. Additionally, you’re likely to qualify for a decent Social Security benefit at age 50, although you still won’t be able to claim it until age 62 or later. 

What Mistakes To Avoid Making?

Although retiring at 50 is much more traditional than retiring at 30, it still means that nearly half or perhaps even more of your life will be spent retired rather than working. Variables such as increased healthcare and unexpected expenses must be factored into your equation, so it’s still better to save as much as you can over these theoretical projections.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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