Millennials are optimistic to retire early, although most are not taking steps to get there. As a matter of fact, rising levels of average student loan debt and lavish spending habits put many Millennials at risk of outliving their retirement savings. With so many factors impacting financial uncertainty, is early retirement out of the question for Millennials?
Meet the FIRE movement (Financial Independence, Early Retirement), a non-traditional approach to retirement that is quickly gaining momentum among Millennials. The goal is to achieve financial independence and break free from the 9 to 5 grind for a more fulfilling life and no longer feeling limited by one’s income.
Spend less, save more
All of this may seem ideal, but is it realistic? Millennials must first understand that income is not the primary obstacle to early retirement – spending is. The digital-dominated generation demands convenience and speed, even when it comes with a heavy price tag. Daily convenience purchases, such as a morning cup of coffee or eating out, are small expenses which can add up quickly.
Many Millennials also spend freely on ridesharing services, the latest electronic gadgets and entertainment. It’s acceptable (and encouraged!) to treat yourself on occasion, but if early retirement is a part of the plan, self-discipline is necessary to control spending. Saving early and saving often are fundamental to early retirement.
Make your money work for you
While living below your means is an important step on the road to building wealth, it is certainly not the only one. Wisely investing money is a key element in achieving long-term financial goals. Setting up and contributing to a retirement account such as a, Roth IRA or a 401(k), is ideal for young professionals to accumulate wealth because it offers the advantage of tax-free growth. Contributing to these types of tax-advantaged accounts is just step one in the right financial direction. Building a diverse investment portfolio within these accounts is the most important step to growing a retirement nest egg.