Investing for retirement in your 20s and 30s: How to Retire Early Without Working 9 to 5

Investing for retirement in your 20s and 30s: How to Retire Early Without Working 9 to 5

Written by Katie Gomez

Every day, more and more Millennials and Gen Z individuals are choosing to forgo the traditional 9 to 5 workforce. It’s not out of laziness or entitlement; rather, they’re capitalizing on opportunities to explore alternative career paths. The idea of a ‘normal’ career has transformed significantly, with many leaving the conventional rat race behind. As a result, the notion of retirement is also shifting, and for many, the dream of retiring early is becoming increasingly attainable. The rise of side hustles and passive income streams, such as stock trading, plays a pivotal role in this change. In this article, I’ll delve into the significance of early retirement planning, particularly for those outside the security of a 9 to 5 job.

The Benefits of Early Retirement Planning 

When it comes to investing, the sooner you start, the better. Younger generations, such as Millennials and Gen Z, have a distinct advantage due to the power of compound interest. Beginning in your 20s or 30s means your money has longer to grow. A recent study from Associated Bank in 2023 highlighted that 70% of older individuals wished they had started investing earlier. Thus, it’s crucial to start funding your retirement account as soon as possible, allowing your money to grow at a rate that outpaces inflation.

While younger generations are pioneering new ways of working and living, it comes with challenges. Many Gen Z individuals, for instance, are bypassing traditional higher education to pursue entrepreneurial ventures. However, they often overlook the importance of saving for retirement without the structure of employer-backed retirement plans.

Setting retirement goals

The landscape of work is rapidly changing. Traditional career paths are evolving, with many choosing to follow passions, start businesses, freelance, or become influencers rather than work fixed hours for decades. But when you’re focusing on retirement, a different mindset is essential. Here are steps to guide you:

  1. Determine Your Desired Retirement Age: Define clear retirement goals. Visualize your ideal retirement age and lifestyle. This clarity will provide motivation and direction.
  2. Determine Your Desired Lifestyle: Consider potential expenses – travel, hobbies, housing. Estimate your annual costs, keeping in mind that you may not need as much as you think for a comfortable retirement. Remember to account for inflation, which historically averages around 2-3% annually.
  3. Calculate Your Retirement Income Sources: Consider potential pensions, social security, savings, or stock portfolios. Determine the expected income from these sources.
  4. Subtract Expected Income from Expenses: This will give you an idea of the yearly savings gap you need to bridge.
  5. Calculate Total Savings Needed: Multiply the annual gap by the number of years you expect to be retired. For instance, with a $20,000 yearly gap and a 35-year retirement, you’d need $700,000.
  6. Consider Your Withdrawals: The 4% rule is a popular withdrawal rate guideline. Adjust this based on your circumstances. For a 4% rate on the previous example, you’d need a total of $17,500,000.
  7. Account for Taxes and Inflation: Different retirement accounts come with varied tax implications. Factor these in.
  8. Monitor and Adjust: Retirement planning isn’t static. Regularly review and adjust your goals as market conditions and life circumstances change.
  9. Double-Check Your Work: Consult with a financial advisor or a knowledgeable colleague to ensure you’re on the right track.

Embarking on a retirement planning journey can be complex, but the steps above provide a solid foundation. If you’re keen on blending trading with long-term investing, consider reaching out to resources like Trade Ideas for further guidance.