Can I Retire at 30 With $1 Million?

Early retirement has become a popular goal. You don't have to search long to find all kinds of online communities built around the concept of FIRE, which is short for "financial independence, retire early."

If you've already saved $1 million at 30, you may be wondering if you have enough to retire. No one wants to run out of money because they retired too soon, so here's what to consider before making that decision.

Is $1 million enough to retire at 30?

A savings of $1 million is quite a bit of money, but it might not be enough to retire at age 30. Instead of retiring, consider working for another five to 10 years to build more wealth first. If possible, you could also see if dialing back your hours is an option, shifting from full-time to part-time work.

It's difficult to know how much money is enough to retire early. One of the most common guidelines people use is the 4% rule. This rule of thumb essentially states that if you have a balanced investment portfolio, you can safely withdraw up to 4% of that money per year (and make adjustments for inflation). For example, if you have $1 million in investments, you can use up to $40,000 per year. Your portfolio's returns will, on average, balance out your withdrawals.

Not everyone agrees on the 4% rule. Some say it should be higher, others lower. But it works well enough as a rule of thumb. So, with $1 million in savings, let's assume you'll have about $40,000 per year of income in your extended retirement.

Your finances could get tight -- especially in your golden years

It could be hard to get by with an annual income of $40,000. The average American household's expenses are $66,928 per year. And the median income is $69,717. If your spending is anything like the average American's, then you'll be well short.

You certainly could live on that much money if you're careful about your spending. However, you also need to consider that your cost of living may increase more than you expect. Here are a few ways this could happen:

• You decide to have kids. The average cost to raise a child is $18,271 per year.
• There's a period of high inflation. While the 4% rule accounts for inflation, you'll still go through your savings more quickly if costs increase much more than usual.
• You have expensive healthcare costs, which becomes more likely for everyone as they get older.

You may be comfortable enough managing your spending in your younger years. But it's risky to assume you can be as flexible with your finances for your entire life as you are now.

A low-cost lifestyle could make it work

Being able to retire early also depends on how much money you spend. If you're comfortable living more economically, or moving to a place where your money goes further, then a nest egg of $1 million could be more than enough.

For example, many remote workers choose to live in countries with a lower cost of living. I've lived in Colombia for several years, where you can live comfortably on $2,000 per month or less. While many of these low-cost locations are outside the United States, there are also plenty of affordable U.S. cities to choose from. Moving to a new city is a huge change, but it can help if your goal is to retire early.

You may also be fine if you don't need much money for your lifestyle and hobbies. Living on $40,000 per year is difficult if you go out often or have large expenses. If you don't spend all that much, then it's much easier to make your money last.

Consider working longer for more financial security

Although it's possible to retire at 30 with $1 million, waiting a little longer will put you in a better position. If you wait another 10 years, invest in stocks, and get an 8% annual return, your nest egg will be worth about $2.2 million -- and that's without adding any more money.

It's your decision, but the good thing is that this kind of savings gives you lots of flexibility. You could take some time off from work and potentially come back to it later, if you want to, or if you don't think your savings will last as long as you want. You could also reduce your hours or switch to a remote work arrangement, giving you money to pay your bills while also being able to live how you want. Spend some time thinking about what you want out of life and retirement, and you'll be able to find the best option for you.