I'm 30 With Almost No Savings. Can I Still Retire Early?

When it comes to saving for retirement, the earlier you start, the better. If you invest while you're young, it gives your money more time to grow. And if you want to retire early, it's even more important to get that early start. After all, if you want to retire 20 years earlier than average, that's 20 years you won't have to build wealth.

If you're 30 with little or no savings, it's normal to wonder if you missed the boat on early retirement. Fortunately, you're still young, so you have time to get your savings in order. Can you get it on track to retire early, though? That's going to depend on a few factors.

Setting your early retirement goals

There are a few key parts to any early retirement plan:

• Your current age
• Your target retirement age
• Your retirement savings goal
• Your income
• Your savings rate (the percentage of your income that you save/invest)

The age range for early retirement is pretty broad. The average retirement age in the United States is 61, so you could retire early at 50 or 55. At 30, even with almost no savings, that still gives you plenty of time to invest.

On the other hand, if your idea of early retirement is 40 or 45, that's going to be much harder. It's still doable, but it will require a very high income and/or savings rate to build enough wealth in such a short time period. You might find that it's more realistic to postpone your early retirement.

How much money do you need to retire early?

A popular rule of thumb for early retirement is to save 25 times your estimated yearly expenses. For example, if you expect to spend $40,000 per year in retirement, you need $1 million. The idea behind this is the 4% rule. It estimates 4% to be a safe withdrawal rate, because if you have your money invested, your portfolio can grow enough each year to sustain itself.

There's debate about the accuracy of the 4% rule, especially for early retirement. But it works well enough as a general guide to how much you'll need to save. Here's how much you'd need to save based on different yearly spending totals:

• If you expect to spend $30,000 per year, you need $750,000.
• If you expect to spend $40,000 per year, you need $1 million.
• If you expect to spend $60,000 per year, you need $1.5 million.
• If you expect to spend $100,000 per year, you need $2.5 million.

Estimating how much you can save

The best way to see how realistic your early retirement goals are is by running the numbers. You can do this with a compound interest calculator. This will show you how much your money can grow over time.

Here's how to do it:

• Set an annual return on investment. Estimate the amount you expect your portfolio to grow per year. Many people use 8% to be safe, because it's a bit lower than the average stock market return of 10% before inflation per year.
• Enter the number of years you have. Subtract your age from your target retirement age to figure this out. If you're 30 and you want to retire at 50, your timeline would be 20 years.
• Set your contribution amount. Decide on the amount you plan to put toward retirement.

Once you've provided that information, the calculator will show you how much money you'll accumulate in your retirement accounts. For example, if you save $2,000 per month for 20 years and get an 8% annual return, you'll end up with $1,186,150.

It's a good idea to experiment with contribution amounts and timelines. This can help you determine when you'll be able to save enough to retire, based on how much you can contribute.

How to get on track for early retirement

With a solid income and a high savings rate, you can retire early, even if you're 30 with little saved. Here are a few things to focus on to help get there:

• Start now. Figure out an amount you can put toward retirement every month, and start doing it. It's important to make this a habit right away.
• Increase your income as much as possible. A big salary helps you build wealth much more quickly. Go after promotions, job hunt, and consider building other streams of income, such as freelancing or starting your own business.
• Be strict about your spending. A high savings rate is a must to retire early. You'll likely need to save at least 30% of your income, and possibly 40% to 50%.
• Invest in stocks. While the stock market has good years and bad, on average, it has grown 10% before inflation per year for the last century. Stick to stock investing for most or all of your retirement savings to maximize growth. Once you're within five to 10 years of retirement, you can move some money to bonds for more stability.

It's no easy feat to retire early, and you shouldn't let that goal affect your quality of life in the present. But if you can save enough, the payoff is definitely worth it.