How to Retire in Your 30s
The financial freedom of a modest, early retirement is actually achievable for many smart and motivated people in college or their early 20"s. If you make early retirement your highest priority
in life and follow a disciplined
path to obtaining it, you should be able to leave work permanently in your 30"s and spend your life and time at your complete discretion. Here"s how to start moving in that direction.
- Define the dream, while documenting the reality. How do you want to spend the rest of your life, post-retirement? Where do you want to live? What do you want to do? And most importantly of all, how much will it cost, year after year, for the rest of your life? This will tell you how much money you need to save and what kind of investments you"re going to have to make in order to support your retirement lifestyle. Don"t forget to include things like health insurance and the effect of inflation. Make a detailed spreadsheet to chart all these variables exactly.
- Make a LOT of money. The quickest, high odds way to do this is by focusing on landing a high paying job. Consider the types of jobs that pay extraordinarily well in exchange for hard work, little psychological satisfaction, and a punishing lifestyle. After all, you"re not choosing a career in the sense that most people are, seeking lifelong satisfaction, as you hope to be only in this job for a decade. Focus on jobs that will reward the fact that you are willing to work harder than anyone else. Some suggestions:
- Investment banking - These Wall Street jobs can pay extremely well. In exchange, you sell your soul: the hours are a grind, the work is dull, and your boss is an egomaniac. But the goal is to get in, work hard and bank the money. Focus on delivering the results, and watch your peers melt away as they think "there"s no way I can do this for 40 years" - you know you don"t have to.
- Sales (positions in high-ticket industries, such as many high-tech enterprise software companies) - Because your pay is directly linked to your sales, and your sales are in a large part proportional to how hard you are willing to work, you can earn a lot doing this dull job of sucking up to corporate IT drones.
- Engineering - Software development, biotech, and other technical positions are high risk paths to wealth. Unlike the investment banking and sales which have high current income, many engineering jobs only hit the jackpot on chancy stock options. However, if you join early at the right startup, you might be be able to Buy a Private Island after 4 years of work. But more likely, you will grind away endless hours for an incompetent 27 year old CEO and his insatiable venture capital masters before the company goes belly up, leaving your options worthless.
- Lower your expenses. The #1 reason people in high paying salaried jobs are still working hard when they are fifty is because they can"t keep their spending under control. To soothe their agony regarding their dull, demanding job, they placate themselves with toys that fail to make them happy: a penthouse apartment, a fancy car, a diamond ring. Resist the massive pressure to dress, eat and shop like your peers, and live a modest lifestyle. Focus on work, as your play will come later. Some keys to not spending:
- Rent a modest apartment. You will be at work all the time, so do not splash out on housing. Clean and small will do just fine. If you live in an area with low housing costs you can consider buying instead of renting.
- Don"t eat fancy dinners. Unless you are a gourmet connoisseur, you have to admit that a $5 burrito tastes 90% as good as a fancy steak served on fine china.
- Keep a budget. Track your expenses. Set goals for saving and celebrate when you meet them.
- Invest wisely. It is beyond the scope of this how-to to explain exactly how to invest your money, but do the research and find a way to make your savings grow and work for you. The richest people invest in real estate and the stock market. Remember that the more you play it safe, the longer it"ll probably take you to retire; on the flip side, the more you gamble, the more you risk losing your money and having to spend another year or more at your high-paying but miserable job.
- Keep your eye on the mark. Not everyone is cut out for the kind of life you"re going to have to lead in order to reach such an early retirement. There will be times when you feel like giving in and throwing in the towel. Have a very clear vision and several ways to remind yourself why you"re doing what you"re doing, because you"ll need them.
- While you will almost certainly want to work somewhere like New York, London, or San Francisco while you are earning your retirement, it is entirely impractical to retire there. Your goal is to sock away savings while living in an expensive city, then move somewhere cheaper. There are plenty of wonderful, affordable places to live in the US, or you can reach your retirement level even faster by moving to a cheaper country. There are entire colonies of retired Americans in cities like San Miguel de Allende, Mexico . One unfortunate outcome of this move is the distance it will create from your friends and family. This is one of the tradeoffs you will have to make in order to gain financial freedom.
- Consider the single life, at least until you retire. To achieve an early retirement, a period of sacrifice and hard work is mandatory, and finding a partner who shares your ambition sufficiently to make that sacrifice will be difficult. Furthermore, finding someone who shares your vision for geographic relocation and kids, and will maintain that vision, is doubly difficult. You can pursue relationships at leisure once you are retired, and you will have more time and energy to focus on your career while you are earning.
- Consider not having children. This approach to early retirement almost certainly rules out the enormous expense of having and raising children. This is a decision you will need to make carefully. If you decide in haste, it may be a decision you come to regret.
- Once you retire, you should be able to spend 3-4% from your nest egg savings each year and have the nest egg continue to maintain its value after inflation. (This assumes that stocks and bonds continue to perform as they have done historically.) So in other words, if you want to live forever on $30,000 - $40,000 per year in today"s dollars, you will need to have $1 million banked when you retire.
- Even if you do not actually retire in 10 years because the money earned in this way may not result in the lifestyle of a lottery winner-millionaire, this is a good way to get ahead. If you accept to slog for about 10 years by following all of the above, you will have set aside a very nice nest egg, and be considerably ahead of your peers who chose the "easy" route. You can then get out of that high-stress job and continue working ... full or part time ... in a different environment, while you monitor your nest egg and let time-value/compound interests do their thing.
- The retirement described here is a modest early retirement, not the "winning the internet lottery" type of retirement available to folks like Pierre Omidyar or Sergey Brin. This is a plan where hard work can get you most of the way there, whereas the jet-set early retirees mix in a lot of luck and timing. As such, your retirement lifestyle will be significantly more modest than most people think of when they consider early retirement.
- Be aware this article is not titled "How to Be Happy". The financial freedom of early retirement described in this article requires sacrificing many things that most people believe are the greatest sources of happiness in life, such as driving a German automobile, wearing clothes with the right label, or for the more selfless, having kids. It is critical that you are self-aware enough to understand whether the freedoms and benefits of retiring early are sufficiently rewarding to offset the sacrifices you will make. This is a question only you can answer.
- Unfortunately, if you"re already in your late 20"s, it may be impossible to follow this strategy for retiring in your early 30"s. While controlling your costs may still put you in a better financial position, you will already be set on a career path that may be difficult to redirect. Your ability to get those high paying jobs will be in a large part the product of hard work and focus in high school and college, therefore develop the work ethic during those years to land that investment banking job.
- Consider that retirement may be boring. You may have a more fulfilling life by getting a lower paying job as a teacher and working till you are 65.