8 Things Millennials Must Do Right Now If They Want To Retire Sooner
Written by
John Csiszar
Edited by
Zuri Anderson
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As of 2024, millennials are between 28 and 43 years old. Although the “full” retirement age for millennials is 67, according to the Social Security Administration, many millennials want to retire early — perhaps as early as age 60.
That leaves just 17 years for the oldest millennials, or as long as 42 years for the youngest. Either way, retiring with enough income by that early age will require some aggressive steps.
Here are the eight most important things millennials must do right now if they want to retire sooner.
Make a Plan
You can’t get to where you’re going in life without making a plan, especially in the financial world — and especially if you’re looking to retire early.
Chart out your investment objectives, your risk tolerance, your time horizon, and what you can do to reach your goals. Most important of all, write down your plan so that you can refer to it in the following decades to ensure that you remain on track.
Start as Early as Possible
The biggest single contributor to a large retirement account is starting early. Compound interest can work miracles on an investment account, but it takes time.
Imagine, for example, that you invested $500 per month at an 8% interest rate for 10 years. You’d end up with an account balance of about $91,000. But if you kept that money invested for an additional 20 years — even without adding a single dime to it after the first 10 years — your account value would jump to over $450,000.
If you continued to invest $500 per month for the full 30 years, you’d end up with over $745,000, according to Ramsey Solutions.
Time could be the biggest asset you have when it comes to retiring early, so it’s essential to start as early as possible.
Boost Your Savings Rate
Clearly, the more that you can save, the larger your nest egg will eventually be.
While many financial experts recommend setting aside 10% to 20% of your income to fund a happy retirement, if you’re looking to retire early, you’ll likely have to boost that savings rate to 40%, 50% or even more.
Find Multiple Income Streams
It’s easier to save if you have multiple streams of income. In addition to your regular job, look for other ways to generate income.
For example, you can start a business, work an additional part-time job or invest in rental real estate to diversify your income stream. This can also help you make it through any times of economic upheaval if there’s a recession and/or you lose one source of income.
Pay Off Your Debt
Debt is a killer when it comes to financial plans. Every dollar you have to pay towards debt is another dollar that you can’t save and invest.
Credit card debt is particularly damaging, as it usually carries double-digit interest rates and can quickly double if you aren’t on top of it.
Leverage Your Employer Benefits
If your employer has a 401(k) plan, you’re in luck — it can be one of the best sources of “free” money that you’ll ever have access to. Most 401(k) plans offer an employer match, meaning your employer will contribute a percentage of your own contributions to your 401(k) account.
Imagine, for example, that you earn $100,000 per year and sock away $10,000 per year in your 401(k) plan. Your employer might match 100% of the first 5% of your salary, which in this case would mean an additional $5,000 into your 401(k) every year, courtesy of your employer.
Over time, this extra money can really add up and help you retire sooner.
Save All “Found” Money
One of the easiest ways to boost your savings is to immediately set aside all “found” money. “Found” money refers to any money you receive that you either aren’t expecting or that falls outside of your ordinary income streams.
For example, if you receive a tax refund or year-end bonus, rather than using it to pay bills or go on a vacation, dump it into your investment account.
Choose the Right Investments
Even if you boost your income and set aside 50% or more of your salary, it won’t be enough to retire early unless you invest it.
According to the Federal Reserve Bank of St. Louis, the average savings account pays an annual interest rate of just 0.45%. That means that if you save $500 per month for 30 years, you’ll end up with just a $192,749 account value, and that’s after socking away $180,000.
If you can instead earn 10% annually — which is the average long-term return of the U.S. stock market — you’ll end up with about $1.14 million. That’s a gain of roughly $960,000, more than 75 times as much profit.
You don’t necessarily have to invest in stocks, but you should take appropriate risks if you want to retire early, rather than simply leaving your money in a savings account.
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