At the age of 24, I woke up to find $2.26 in my bank account. I was unemployed and living back at home with my parents. They in turn were in their mid-50s and chasing a far-off retirement, like most of their friends. That morning, I decided to pursue retirement on my own terms — terms that meant not waiting until I was 65, 60, or even 55.

I read everything I could about personal finance, began making sacrifices for my future freedom and navigated my way through years of trial and error. I increased my savings rate each month, put everything I could into investments, rented my apartment to roommates for more than the cost of my mortgage, launched multiple side hustles and did more. I spent time each day assessing my financial status and recalibrating in order to maximize my investments.

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One of the most crucial factors in my own journey, though, was time. Time is much more valuable than money, and you can make it work to your benefit. Here’s why.

You can ‘retire’ with less money at 30

You can “retire” with less money at 30 than you’ll need at 60 and not have to work for that extra 30 years! It sounds crazy, but because of how the stock market works and the magic of compounding, it’s true. Here’s why:

Even though the younger you are, the longer you need your money to last, your money has more time to grow — in this case, an additional 30 years of compounding before you turn 60, when most people start eyeing retirement. Even if you take 3% or 4% withdrawals adjusted for inflation from your investment portfolio, your money is still likely to triple or quadruple by the time you’re 60. And you can even adjust your withdrawal for inflation and spend more money over time. This isn’t unrealistic if you want it.

Read: This 24-year-old is on track to save $100,000 by age 25, and she has advice for other women who want to be rich

Here’s an example using “the rule of 72,” which is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. “The rule of 72” is fairly accurate for low rates of return and applies to many portfolios, whether all stocks, the S&P 500

SPX, -0.81%

or a mix of stocks and bonds.

Let’s say your inflation- and dividend-adjusted compounding rate averages out to approximately 7.2% per year over a 30-year period. A 7.2% rate is optimistic, certainly, but I’ll use it to illustrate my point. Your money will double every 10 years (72/7.2% = 10 years). Thus, if you have $1 million invested at the age of 30 and don’t take any withdrawals, then it would be worth $2 million when you are 40, $4 million when you are 50, and up to $8 million when you are 60. This math won’t pan out exactly the same with a lower rate, but you’ll still be able to build substantial savings

Instead, let’s say you take 3% withdrawals each year. This would reduce your average annual compounding rate to about 4.2%. When we then apply “the rule of 72,” your money will double approximately every 17 years (72/4.2% = 17). Thus $1 million at 30 would be worth $2 million at age 47, then $4 million at age 64, then $8 million at age 81, and so on. Even though you had been living off of 3% of your investments, your portfolio would still have quadrupled over 34 years.

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Of course, these are hypothetical examples, with many variables in play. While 7.2% is a reliable historical average return over any 10-year period in history, in the future it could be less — or more. Other factors, like sequence-of-returns risk (your investment performance over the first five to 10 years of “retirement”) can also impact how much your money will compound. If stock-market returns are low or negative during your first five to 10 years of retirement, then you’ll have a smaller portfolio balance that can grow and compound, but you still need less money to retire at 30 than 60.

However, too much of the traditional retirement narrative is built on fear of running out of money, when in reality, even with sequence-of-returns risk, there is a lot more upside than downside. If you’ve invested enough and maintain a 4% withdrawal rate, the odds that your portfolio will increase over time is much greater than running out of money.

Read: There’s another option when the answer to ‘can I retire’ is ‘not yet’

When you start and how much you save matter a lot. It takes more money to retire at 40 than it does at 30, and even more money to retire at 50 simply because you have less compounding time for your portfolio to reach the same goal. Those 10 years between 30 and 40 actually make a huge difference over the long run. But even if you retire at 52, it’s still a lot earlier than 70 or never!


The younger you are, the more time and likely energy you’ll have, so you can always go back to work or supplement your investment withdrawals (by doing something you love doing). You might find that financial freedom, rather than retirement per se, is you goal. If you can build some side or passive income streams, or work part time, then you can “retire” from the job you don’t like and work on one you do, even if it pays a lot less money.

The finance world asks: “How much money do you need to live on for the rest of your life?” But you should first ask yourself: “What kind of life do you want to live?” Only then can you ask: “How much money do you need to live that life?”

Grant Sabatier is the author of “Financial Freedom” and creator of Millennial Money, a website that has reached over 10 million readers.

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