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Retirement, for most people, is something they associate with being “old”. I remember as a young child seeing my elderly neighbors working in their yards or coming and going from their houses any time of the day whenever they pleased.
“Don’t they have to work?” I’d innocently ask my mom.
“No,” she’d say. “They’re retired.”
This had been the norm for over 100 years. Believe it or not, the modern concept of retirement was invented by the Germans back in 1889. Chancellor Otto von Bismarck proposed the idea that “Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state”.
Though his actual goal was to free up jobs for the unemployed youth at the time, Bismarck established a new social construct where it became acceptable for workers to exit the workforce between ages 65 and 70.
The idea quickly gained popularity, and it wasn’t long before other countries started adopting similar practices.
As I moved into early adulthood, I assumed that I would be like everyone else and work for the next 30-40 years until I too was in my 60s and “old enough” to retire.
However, this paradigm was challenged when I started visiting the bookstore on my lunch break and began to notice more and more titles on the topic of financial freedom.
Specifically, there was one book called “Early Retirement Extreme” which was about a guy named Jacob Lund Fisker who had retired in his early 30s after working for just 5 years.
As it turned out, he had a blog by the same name, and I quickly discovered the Internet was full of thousands of other stories of people who had either done the same thing or were working towards it.
I became obsessed with the concept of financial independence! Though it wasn’t necessarily my goal to retire as quickly as possible, I was amazed at how so many people were pulling this off, and at such a young age.
More importantly, I wanted to know how they dealt with so many of the logistical obstacles like building a sustainable nest egg, getting early access to their retirement funds, and so many other questions I had.
If you have any doubts about whether or not this is possible, I can assure you that it is a real thing. People really do retire in their 30s.
In this post, we’ll identify the challenges that lie ahead, how people are overcoming them, and some additional points that you should consider before seeking early retirement.
Why Retirement at 30 Seems so Unrealistic
Ask anyone on the street if it’s possible to retire in your 30s, and the idea will seem so ridiculous that they’ll probably think they’re on some kind of prank, hidden-camera show.
The idea seems laughable. Who really does that? There are so many things standing in your way, and they’re all perfectly valid reasons.
Here are a few of their arguments.
No Pension Income
Up until the 1990s, most Americans retired once they were eligible to receive a pension. A pension is a guaranteed stream of monthly payments that you receive from your employer in exchange for having worked for them over your career. Generally, the minimum was 25 to 30 years.
Under the pension system, a person who starts employment in their late 20s or early 30s would usually qualify to start receiving benefits by the time they were in their 60s.
Hence, this aligned nicely to the social norm created by Bismarck 100 years prior and was now widely shared around the world.
But that gravy train came to halt. Starting in the 1980s, companies discovered that they could significantly cut their costs if they eliminated their pension plans. Instead, they replaced them with a new type of retirement plan called the 401k where participants had to save up their own money for retirement.
Today, 401k plans are the most popular type of retirement planning tool available, and pensions are nearly extinct.
This means that unless you’re actively saving your own money, then you’ll have no foundation to retire upon. That’s true whether you’re in your 30s or your 70s.
Not Having Enough Savings
Even if you are saving your money, it seems pretty much impossible to ever get your balance as high as you’d need it to sustain being retired.
Let’s follow the logical progression of modern-day retirement planning to illustrate just how ridiculous this would be:
- Let’s say you and your spouse earn a combined total of $80,000. For lack of better information, we’ll also assume this is how much retirement income you’d need to maintain your current standard of living.
- Using the popular 4 Percent Rule for retirement planning, you can calculate your target nest egg by dividing your retirement income by 0.04. In this case: $80,000 / 0.04 = $2,000,000.
- Therefore, if you’re in your 20s and want to retire by the time you’re in your 30s, this only gives you about 10 years to save. With the help of a free online savings calculator, we can find that you’d need to save a minimum of $12,063 per month!!!
Yeah … that’s not happening …
I remember this was also my reaction the first time I crunched the numbers. I came up with a nest egg target of somewhere between $1 and $2 million and thought to myself “There’s no way that I or anyone could come up with that much money unless they saved for decades!”
No Compounding Returns
Another huge component of modern-day retirement planning is the utilization of compound growth. Compound growth is the money that’s earned on top of your contributions plus any other previous earnings that have accumulated.
You could think of it like a snowball that gets bigger and bigger each year that rolls on.
In the traditional 30-year retirement scheme, compound growth is your best friend. For instance, let’s stick with that $2 million nest egg target.
With a 30-year time horizon, you could drop your monthly contributions down to $1,764. That’s still a lot of money, but it’s not nearly as bad as the $12,063 we calculated earlier.
More importantly, your contributions would only total $635,180. The remaining $1,364,820 would come from the earnings you’ve accumulated thanks to compound growth. In other words, your savings basically tripled because of your long-term investment horizon.
However, people who want to retire in 10 years or so don’t have this luxury. Compound growth really doesn’t start to make a significant impact on your nest egg until about 15 to 20 years into your investment journey.
What’s worse is that if you start to dip into those investments to use as income, then it’s going to stifle the effects of compound growth completely.
They Might Run Out of Money
Another problem that early retirees face is the probability that their money won’t last them forever.
This goes back to the 4 Percent Rule I mentioned earlier. Originally developed in the 1990s, the calculation was modeled after people retiring in their 60s who only needed their money to last for the next 30 years.
4 percent was the optimum number – the highest amount that could safely and confidently be withdrawn.
Unfortunately, however, when you run the same numbers for 40, 50, or even 60 years, the 4 Percent Rule starts to show higher probability rates of failure. The majority of historical data shows it would work, but you’d admittedly be taking a much bigger risk with your money.
Not Socially Accepted
Finally, one of the biggest challenges to early retirees is that society doesn’t know what to make of it. I know whenever I talk to my coworkers or friends about my goals to retire in my 40s, it leads to some pretty awkward glares.
I can only imagine what they’d be thinking if my goal was to accomplish this in my 30s.
For older generations, this comes back to the pension system. They had to trade 30 years of their lives to receive their payments and earn their retirement.
In their minds, a person who tries to call it quits while they’re in their 30s simply hasn’t “done your time” yet.
Meanwhile, there are many outspoken media critics of early retirement. Back in 2019, financial guru Suze Orman made headlines when she went on the “Afford Anything” podcast and said that early retirement was “the biggest mistake, financially speaking, you will ever, ever make in your lifetime.”
As harsh as her comments came across to early retirees, there was some substance to her arguments.
For some people, your 30s, 40s, and 50s could be pivotal years in your career – both from an earnings standpoint as well as a sense of fulfillment and accomplishment. This begs the question that if you choose to separate from employment, could you be squandering some of the best opportunities of your life?
How the F.I.R.E. Movement Changed Everything
Despite all of these obstacles and criticisms, there has been a growing number of people who still seek to retire as early as possible.
After noticing the book Early Retirement Extreme, I went online and found thousands of stories by other people who are trying to accomplish the same thing. Over the past decade, this concept has become more mainstream than I ever could have imagined.
The majority of the people promoting this idea refer to themselves as the F.I.R.E. Movement. F.I.R.E. stands for “financially independent, retired early”.
You can find this acronym scattered throughout millions of news articles, social media posts, YouTube videos, etc. There’s even a documentary called “Playing with F.I.R.E.”
Fisker from Early Retirement Extreme was just one example. Other famous F.I.R.E. figures who’ve separated from work by their 30s include:
- Pete Adeney from the blog Mr. Money Mustache
- Winnie Tseng and Jeremy Jacobson from Go Curry Cracker
- Carl and Mindy Jensen from 1500 Days
- Brandon, the creator of the Mad Fientist blog and podcast
- Kristy Shen and Bryce Leung, authors of the Millennial Revolution
And so many more!
So how did they pull it off? They were able to achieve early retirement through adhering to a few key principles.
Live an Extremely Frugal Lifestyle
One of the most common themes you’ll find in any retire-by-30 success story is the preference for extreme frugality. F.I.R.E. bloggers are notorious for rejecting common symbols of wealth and consumerism like luxury cars, big homes, designer clothes, etc.
Instead, they encourage you to challenge yourself to get the best deals possible. For instance, instead of buying a brand new $80,000 SUV, why not find a high-quality used one for $10,000 instead? For that matter, why not bike or walk to work instead of driving altogether?
Extend that same concept to your home, energy bills, eating habits, clothing, entertainment, vacations, and so on. People who go through this exercise quickly begin to realize just how many cheaper alternatives there are and how much of their income they’ve been effectively wasting this whole time.
This is something I believe everyone should be doing, regardless of whether they want to retire early or not.
Nearly everything you can buy can quickly double in price if you’re not careful. A simple lunch at Qdoba can go from $9 to $18 if you add on a drink, chips, salsa, extra ingredients, etc.
No matter what your income is or what it is you’re buying, you need to always be mindful of your purchases. It's far too easy to let them slip through the cracks and let them inflate to the point of being out of control.
Save Large Portions of Your Income
Why are F.I.R.E. seekers so adamant about being frugal? Because the immediate benefit is that you’ll free up excess money in your budget that you can put towards your goal of becoming financially independent.
This is going to be way more than the typical 10 percent or so that a normal person contributes to their 401k plan. Most people in the F.I.R.E. movement strive to save as much as possible – sometimes as much as 50 to 75 percent of their income!
Obviously, the idea is that the more money you save, the more rapidly you’ll build up your nest egg and be able to retire. However, there is also a philosophical side to this strategy as well.
Early retirees look at this as a tradeoff between buying “things” versus buying back their time.
For instance, which would you rather have: An expensive 3,000 square-foot home or the opportunity to knock 5 to 10 years off of the number of years you need to work for your employer. For someone seeking F.I.R.E., the choice is clear – reduce your working years.
Besides saving for the sake of saving, I’ve always believed that utilizing your retirement accounts was a tax-savings opportunity that’s too good to miss out on.
By maxing out your 401k plan ($19,500 as of 2021), you’re effectively saving $4,290 in taxes each year. That doubles to $8,580 if both you and your spouse do this.
Lower Expenses Means a Reduced Nest Egg Target
It’s pretty clear that lowering your expenses means having more money available to save. But something a lot of people don’t consider is how this can also help the back-end of your early retirement efforts.
Go back to the 4 Percent Rule for a second. Remember that in our previous example, someone who needs $80,000 per year would have to save up $2 million to retire.
So, what happens when you need a lot less than $80,000? The answer is that you’ll also need a much smaller nest egg. The two things are proportional.
Early retirees know this and use it to their advantage. Here are a few popular examples:
- Jacob Fisker from Early Retirement Extreme claimed to have reduced his living expenses down to just $7,000 per year. By doing this, it meant that saving just $250,000 would guarantee that he’d be able to cover his living expenses for at least the next 35 years.
- Mr. Money Mustache got his family’s living expenses down to just $24,000. Using the 4 Percent Rule, his goal was to save up a minimum of $600,000 in his nest egg. Again, he knew that building up this kind of reserve would provide income for at least the next 25 years.
- The Jensen’s from 1500 Days targeted $40,000 for their annual expenses. Also using the 4 Percent Rule put their nest egg target at $1 million.
Though you may not identify or even agree with these numbers, the lesson is still clear: The less money you need, the lower your nest egg can be. This is yet another reason why frugal living is so critical to sustainable early retirement.
Invest for High Returns
Finally, the last ingredient to a successful early retirement strategy is to invest those savings for optimal returns.
People who want to F.I.R.E. understand that keeping your money in an old-fashioned savings account or even in bank CDs just won’t cut it. To retire early, you’ve got to grow your money and keep it growing even after you’ve separated from work.
To accomplish this, almost any F.I.R.E. will tell you that you don’t need to look any further than index funds.
There are many different types of index funds, but the one that’s the most popular is the one that follows the S&P 500 stock market index – the top 500 companies in the U.S.
There’s a long-standing belief that funds like this are superior to almost every other type of fund because over the long haul they produce the best returns for their shareholders.
In the past, I used to research dozens of mutual funds before I’d make my choice about which ones to invest in. But a year later when I’d compare my returns against those from the index funds, the index funds always did better.
So now I just keep things simple and invest the bulk of my savings into index funds.
Hustling Your Way to Financial Freedom by Your 30s
While the F.I.R.E. movement has become one of the most popular ways to retire early, if the idea of cutting your expenses down to near poverty levels sounds unappealing, then you’re not alone.
While I firmly believe frugality has its place at any income level, my vision of early retirement involves a little more spending than $24,000 per year.
It’s important to keep in perspective that F.I.R.E. is just one path to early retirement. In this section, I’d like to offer a different strategy: Hustling your way to financial freedom.
Acquiring Niche Skills
Perhaps this particular strategy is best depicted through the story of Grant Sabatier, author of the book “Financial Freedom” and the blog Millennial Money.
Sabatier’s backstory starts in 2010 with him at age 25. He had just been fired from his office job, was back at home living with his parents, and had only a mere $2.26 left in his bank account.
Sabatier had an “a-ha” moment when he read the book Your Money or Your Life by Vicki Robin and Joe Dominguez. This book teaches you about how much of your life energy you trade away for money, and Sabatier realized just how little he was “actually” making at that office job.
He eventually taught himself how to become a Google ad manager, started side hustling, and got his income up from nothing to $300,000 per year.
Over the next five years, he saved 40 to 80 percent of what he was making, invested it, and those earnings eventually grew into $1.25 million by 2015 (the year he turned 30 years old).
Even though there are a lot of elements of the F.I.R.E. movement in this story (investing, high savings rates), the thing that makes it different was Sabatier’s ambition to grow his income.
He didn’t let being fired set him back or take a lesser-paying job out of necessity. Instead, he pushed himself to learn a niche job skill, become good at it, and then hustle his way to unbelieve earnings.
There are many other examples of 30-year-olds who have channeled their creativity into incredible amounts of revenue:
- Spencer Haws from the blog Niche Pursuits began creating websites back in 2006 and quit his job in 2011 when they started generating over $10,000 per month. He then went on to create the search engine tool “Long Tail Pro” which was later sold for an undisclosed but presumably large sum of money.
- Graham Stephan, a former real estate agent turned YouTube star claims to earn nearly $6 million per year after expenses.
- Michelle Schroeder created an online course called Making Sense of Affiliate Marketing which earns over $1.5 million per year.
There are countless other stories of young people who have made similar accomplishments through real estate, ebooks, coaching, and by starting their own businesses.
I can personally attest to the power of side hustles. Over the past decade, I’ve experimented with being a blogger, ebook author, affiliate marketer, and now a freelance writer.
This extra effort has added anywhere between $5,000 to $50,000 per year on top of what my wife and I earn from our day jobs.
Not only do we get to enjoy some of the spoils of our hard work, but this has also enabled us to save large amounts of our income into our retirement accounts which helps us get that much closer to financial freedom each year.
Trying Out a Semi-Retirement
Perhaps one of the best ways to retire by your 30s is to not really retire at all. This is the concept of semi-retirement.
A semi-retirement is where you gradually transition away from working full-time rather than calling it quits altogether.
Doing this can open up a whole range of new options. You could reduce your hours at your current job by going part-time. Or you could get a different part-time job doing something you love like teaching or being creative.
The Luxury of a Lower Nest Egg
The big advantage is that you won’t necessarily need as much money as you once thought in your nest egg. Because you’re still working, even if it’s just a few hours per week, there’s still an influx of money coming in from your job that your nest egg doesn’t need to provide.
To put this in perspective, let’s use the 4 Percent Rule. Let’s say your part-time gig is earning $2,000 per month. That would be the equivalent of saving up nearly $600,000 in your nest egg.
Therefore, someone who expects they’d need $1 million to retire early could instead opt to work part-time earning $2,000 per month and reduce their nest egg target down to $400,000 to $500,000.
Solving the Problem of Boredom
Perhaps the most important benefit of semi-retirement that I like is that it solves the question of what you can do with your newfound free time.
This has long been a problem with retirement, both for traditional and early retirees. A Federal Reserve Board study found that one-third of the people who retire end up going back to work because they simply want something to do.
This can be especially true for people who F.I.R.E. As you’d expect from someone in their 30s or 40s, they become restless and start to yearn for something that brings value or fulfillment to their lives.
Many times, that means going to work doing something they actually like as opposed to a job they might have previously felt like they had to have before.
Personally, I want to use my so-called early retirement years to start my own business providing financial resources and coaching to those who need it. Rather than go a traditional route working for a large financial advisory firm that has its own agenda, I want to be my own boss and do things the way I think they should be done.
The Best of Both Worlds
Perhaps the best part of a semi-retirement is that it allows you to create your own flexible terms. Yes, you might still work, but it could be much more accommodating than what your schedule permits now.
For instance, suppose you decided to start freelancing and only worked a half-day instead of a full day. With all that extra time, you could:
- Be more active in your children’s school or sports schedule
- Visit with your parents or friends more often
- Volunteer doing something you actually care about
- Get better at doing a hobby you enjoy
It doesn’t matter what it is. The choice is yours. It’s your new free time, so you can do with it whatever you please.
Whatever You Do, Don’t Chase a Number
Trust me … I’m a huge promotor of financial independence. Otherwise, I wouldn’t be trying to achieve it myself!
But after a decade of reading and following early retirement blogs, if there’s one mistake I would caution you against, it's this: Don’t chase after a number simply for the sake of retiring early.
It’s great that there are so many bloggers and other people around the world who have been able to retire by their 30s. But that doesn’t necessarily mean that you can or even should.
Everyone’s financial situation, perspective on spending, and ability to sacrifice are different. And just because “some guy” on the Internet did it doesn’t mean that this is the right path for you.
I can’t tell you how many stories I’ve read about people from the F.I.R.E. movement who have gone back to work years later because the experience turned out to not be what they thought it was going to be. Even Sam Dogen from the popular Financial Samurai blog decided to start looking for full-time work seven years after retiring at age 34.
Sometimes they realize that maybe what they did at their jobs was the thing that made them happy all along.
The point of financial independence is not to retire as quickly as possible. It should be to do it in a way that brings you closer to your goals and the things you love.
You should also follow a path that best fits with your personality and what you’re prepared to put into it. As long as it’s a solution that will provide you with sustainable financial security and enable you to pursue your ambitions, then you’ll have everything you need.
The Bottom Line
Yes, it’s possible to retire in your 30s. There are thousands of examples of people who have made it happen, and this number keeps growing every year.
Early retirement is not without its challenges. The traditional methods of retirement such as taking decades to save small amounts of your income and leveraging compound growth won't be viable. You’ll also have to deal with the possibility of running out of money as well as the potential social repercussions.
Despite these obstacles, a group known as the F.I.R.E. movement (financially independent, retired early) has found ways of overcoming them.
They've been able to do this through leading extremely frugal lives, saving huge portions of their income, and investing for high returns.
Of course, cutting your expenses is not the only way to retire at a young age. There are other examples of people who have increased their income to hundreds of thousands or even millions per year through the creation of products or businesses.
This allowed them to quickly grow their net worth and achieve financial freedom.
Another creative solution to early retirement is to only retire partially. People who opt for a semi-retirement will commit to working part-time but then can rely on a smaller nest egg to supplement their income.
Even though you'd still be working a few days per week, you'd have the flexibility to do work where you want when you want.
No matter what age you want to be retired, the best thing you can do is to do it for the right reasons. Understand your options and what you're willing to do or sacrifice to get there. In the end, choose the path that best aligns with your goals and provides you with the financial security you need.