Much has been made of millennials’ bizarre relationship with their careers. Sometimes there are valid points, and other times certain talking points tend to be overblown. One thing seems clear though: Millennials are largely determined to retire early. This point was made in an NBC News report last year that cited 43% of millennials expecting to retire before the age of 65. A majority of millennials also reportedly chose 61 as the ideal age to retire.
That’s awfully young these days, and it may be particularly difficult for some hopeful millennials given that they also (somewhat famously) tend to mistrust popular methods of investment. But there are ways for young people today — including those in Gen Z — to work toward early retirement. The following are seven tips that can help.
1) Pick a Retirement Plan
Sometimes the most obvious advice is still the best! Our piece ‘How Millennials Can Effectively Prepare for Retirement’ recommended that people in this generation pick out a suitable retirement plan, and this is truly an essential step for anyone hoping to retire early. Whether that means a company-sponsored 401(k) plan or an independent IRA will depend on your situation. But you should absolutely start one plan or another to begin growing your savings ASAP for an early retirement.
2) Start investing in the stock market
Investment in general is a good idea for those who want to make the most of their income. But investing in the stock market in particular may ultimately be the best strategy. According to an FXCM analysis of this particular type of investment, stocks have historically provided the highest long-term results of any asset class — which is really what you’re looking for if you’re planning for retirement. Stock investment requires some research and effort if you’re to do it successfully. But even if you do it by way of buying into a professionally traded fund, it’s a good idea to funnel some income toward investments that can earn significant returns over the years.
3) Set expectations realistically
While it's wise to start saving and investing as quickly as possible, it's also important for young people to do their research and set realistic expectations. Fortunately, there are tools available that can help with this. For instance, beyond doing you own math, consider taking a look at the Department of Labor's lifetime income calculator, which effectively shows you your retirement fund in the form of monthly payments. A tool like this can help you to gain a clearer picture of how much you're saving and how much you still need to reach your goals.
4) Knock out debt early
For young people specifically, knocking out debt is a top concern. Given how many young adults these days are saddled with student debt, it’s common for them to feel as if they simply don’t have the money available to start saving and investing. It’s a legitimate problem, and one that isn’t going away until the debt itself does. We’d still recommend anyone planning for early retirement put some money into savings and investments as soon as possible, so that it can begin to grow. But debt should be a priority, because the sooner it’s handled, the sooner you can invest more in your future.
5) Start a side hustle
At a certain age, a side hustle can be hard to manage. You may be further along in your career, for instance, or you may have a family and less time to devote to hobbies or projects. For young people focusing on retirement though, a side hustle can be an excellent idea. Basically, it can serve as an extra income stream that can funnel money mostly toward your retirement savings or investment plan. To give you some ideas in this vein, CNBC listed blogging, app development, and teaching among the popular side hustles people are taking advantage of today. But really, anything you can profit from and have the time and skill for can work.
6) Avoid big expenses
Young people today tend to be focused on making the most of their money. But they’ve also come of age at a time when it’s particularly easy to spend money unnecessarily. From streaming subscriptions, to pricey clothing relentlessly advertised on social media, to electric cars and high-class apartments, there are a lot of temptations. Young people would do well to avoid as many big and unnecessary expenses as possible, and instead direct extra funds toward investment and retirement. (You may be surprised how good it will feel to click away from that $120 sweater you’re considering and put the same amount of money straight into your retirement fund!)
7) Take a few long shots
Take this suggestion with a grain of salt, but it’s also not a bad idea for young people to take a few low-risk long shots on investments. This does not mean that you should pour money into boom-or-bust prospects in the hopes of earning quick riches. But an occasional small investment in an asset with potentially lucrative long-term potential isn’t necessarily a bad idea. Whether that means an exciting new cryptocurrency, a promising tech company beginning to emerge, or anything of that nature, it’s a chance at a significant return. Just remember that you shouldn’t risk much on this strategy, and most people don’t hit it rich through long-shot investments. But a few conservative maneuvers of this sort can be worthwhile.
Ultimately, saving for early retirement comes down to manning your finances, cutting unnecessary costs, and investing diligently in your own future. It’s not easy, and it does require constant effort. But don’t let anyone tell you it can’t be done, either! With the right approach, you can absolutely increase the likelihood of early retirement.
For more tips and information regarding retirement plans, contact us.
