How Realistic Is Early Retirement For Women Millennials? 7 Things To Know

The younger generations aim to exit the workforce before they reach 60 and enjoy the rest of their lives doing the things they love without worrying about money. How plausible is it to achieve this goal? Here are seven things every millennial should know about early retirement.

The Financial Independence, Retire Early (FIRE) is an economic movement that involves saving up to 75% of one’s yearly income and living with only the basics in the name of building wealth. 

The consensus is that you can stop working and enjoy your freedom if you save 25 times your yearly expenses. 

What motivates this goal? The primary driver for this extreme-saving lifestyle is to be free from the daily 9-to-5 grind. Is it possible? It’s challenging, but anyone with the right money strategy, mindset, planning and discipline can retire before 60.

The formula for early retirement is simple. Here’s the game plan for it.

Some millennials want to stop working young to travel the world, while others want to focus on their passion projects. 

Depending on the goal, get the math of your living expenses for the next 25 years. If your yearly expenses cost $50,000, multiplying it by 25 will give you $1,250,000. 

Do you have outstanding debts that will make it harder to save? Are you supporting your kids’ education or paying for the care of an aging loved one?

Care responsibilities, especially in the form of financial support, can hinder your goal of retiring early. When people hit 60, their health starts to decline, and their mobility may become limited. Sometimes, this leads to costly hospital admissions that adult children assist with financially. Savings could be a challenge if you’re supporting others. 

However, there are workarounds to this problem, such as increasing your income by taking a second job or making strategic investments. 

Using the example above, if you need $50,000 for yearly living expenses, you must set aside around $4,166 per month.  

Now that you have a precise number, the next challenge is putting that amount in the bank. This is where assessing your budget comes in. Sometimes, people overlook the small deductions from their accounts to subscription services they don’t use. 

Monitor and track where your dollar goes. Inspect your expenses and see if you can cut some of them. For example, cancel a gym subscription if you’re not using it or stop paying for mobile data if you have Wi-Fi at home. 

Millennials owe an average of $38,877 after graduating from university, which hinders them from building their wealth early. Whether a credit card, student loans or a mortgage, any borrowed money is an expense that should be included in your budget. 

Two approaches for settling outstanding loans are debt snowball and debt avalanche. You make minimum payments for both, but you focus on getting rid of debts with the highest interest for the latter strategy. The goal is to zero your loans out as soon as possible, except for a long-term mortgage. 

A good rule of thumb is to put aside 10% to 15% of your income for savings. However, you must be more aggressive and aim to save up to 75% if you want to retire early. 

Begin building your cushion fund. While this cash is reserved for unplanned expenses, it could eventually become part of your retirement fund.

Low income and pay gaps are a couple of hurdles in saving for early retirement. Savings are out of the question for people who get paid minimum and live paycheck to paycheck. Additionally, women take home less than men. 

In 2022, women earned 82 cents for every dollar men earned. Pay inequalities extend to skin color, educational background and industry. It turns out this problem is more systemic than people realize. While it can’t be fixed immediately, don’t let this stop you from pursuing your goal. 

Put some capital in taxable accounts. A brokerage account, for example, allows you to invest in publicly traded assets like mutual funds, bonds, stocks and exchange-traded funds (ETFs) through a broker. Unlike individual retirement accounts (IRAs) and 401(k)s, they don’t have any contribution limits. Plus, you can withdraw your money at any time without penalties. 

ETFs and tax-managed funds are tax-efficient investments. They trigger fewer capital earnings, so tax cuts are low. Municipal bonds are also an excellent option since you pay zero tax in interest income at the federal level. You may also get exempted from any deductions at the state and local levels. 

Choose financial instruments to help you multiply your cash and fatten your retirement fund. 

You can also retire early if you live minimally and decrease your retirement yearly expenses, which many do. It’s possible if you let go of life’s comforts, like a weekly dine-out at a restaurant or monthly spa treatments. By adjusting your retirement lifestyle and target yearly spending, you can get extra cash to put toward savings. 

If you want to leave the workplace before 60, saving most of your income, living below your means and investing your funds in profitable financial instruments can help you achieve the goal.