How Can I be Financially Independent by 30?
To be financially independent by age 30 one would need to save a very high portion of their income and have a very tight control on their spending in retirement. At an 80% savings rate, one could expect a first-year withdrawal amount of about $30,000 if they save 80% of their income through their 20s.
Well, the first thing you need is a very rich grandparent…
Wait. Before we dive into that plan it would probably be more helpful to run a more realistic scenario first.
Since most of us probably don’t have much hope of inheriting a life-altering amount of wealth by the time we turn 30, let’s look at what it would take for the average person (like our friend Average J) to be financially independent by 30 while working an average job with an average income.
We’ll make some very basic assumptions about Average J, then run some adjustments to see how things change depending on how strong Average J’s income is between the ages of 22 and 30.
Because every year will count significantly toward the likelihood of success, we’ll also assume Average J is trying to reach FI before the beginning of his 31st year instead of his 30th birthday. In other words, a nine-year period instead of eight.
Average J’s likelihood of success in making a portfolio of assets last depends primarily on 1) the savings rate in building the portfolio, and 2) the rate at which funds are removed from the portfolio (spending).
The biggest challenge with retiring at 30 isn’t accumulating the capital you need to fund retirement, it’s making it last for a possible 50 years or more.
Said another way, the goal to retire by 30 is the equivalent of building a portfolio in less than 10 years that must last 50 years or more.
To cover an array of possibilities we will calculate anticipated portfolio growth for a range of savings rates and then calculate the annual spending rate based on the 4% rule, as well as more conservative withdrawal rates of 3% and 2%.
Finally, because retiring by 30 is such an ambitious goal, I want to show what might happen if one were to delay retirement until 40 or 50 years old.
The impact is considerable and worth keeping in mind if you’re pursuing an aggressive goal like financial independence at a young age.
Anticipated Portfolio Size by 30
With ambitions to effectively retire at age 30, I’m guessing Average J also went to college.
According to ThinkImpact.com, the average starting annual salary for college students in 2023 is $55,260.
That’s quite a bit better than I expected to be honest.
Using the average starting annual income of $55,260 with a generous annual salary increase of 5% and an average annual return of 10%, Average J can expect the following year-end portfolio values for savings rates of 30%, 40%, 50%, 60%, 70, and 80% of income.
| Savings Rate – Average Income | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 22 | $55,260 | $17,504 | $23,339 | $29,173 | $35,008 | $40,843 | $46,677 |
| 23 | $58,023 | $36,841 | $50,288 | $62,860 | $75,432 | $88,004 | $100,576 |
| 24 | $60,924 | $59,997 | $81,285 | $101,606 | $121,927 | $142,248 | $162,570 |
| 25 | $63,970 | $86,542 | $116,814 | $146,017 | $175,221 | $204,424 | $233,628 |
| 26 | $67,169 | $116,881 | $157,414 | $196,768 | $236,121 | $275,475 | $314,828 |
| 27 | $70,527 | $151,460 | $203,684 | $254,605 | $305,526 | $356,447 | $407,368 |
| 28 | $74,054 | $190,776 | $256,288 | $320,361 | $384,433 | $448,505 | $512,577 |
| 29 | $77,756 | $235,383 | $315,965 | $394,956 | $473,948 | $552,939 | $631,930 |
| 30 | $81,644 | $285,892 | $383,533 | $479,416 | $575,299 | $671,182 | $767,065 |
Before we go any further, we can already see that the annual savings rate has a huge impact on the overall portfolio value over time.
I’m not going to shut the door yet, but if you’re only putting back 30% of your annual income, you’re going to have to seriously control your spending or consider working a bit longer in order to retire at 30.
Perhaps you have a higher-than-average income, though. What would the results look like for someone with a starting salary of $82,890?
| Savings Rate – 50% Above Average Income | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 22 | $82,890 | $26,256 | $35,008 | $43,760 | $52,512 | $61,264 | $70,016 |
| 23 | $87,035 | $55,261 | $75,432 | $94,290 | $113,148 | $132,006 | $150,864 |
| 24 | $91,386 | $89,995 | $121,927 | $152,409 | $182,891 | $213,373 | $243,854 |
| 25 | $95,956 | $129,813 | $175,221 | $219,026 | $262,831 | $306,636 | $350,441 |
| 26 | $100,753 | $175,321 | $236,121 | $295,151 | $354,182 | $413,212 | $472,242 |
| 27 | $105,791 | $227,189 | $305,526 | $381,908 | $458,289 | $534,671 | $611,052 |
| 28 | $111,081 | $286,165 | $384,433 | $480,541 | $576,649 | $672,757 | $768,865 |
| 29 | $116,635 | $353,075 | $473,948 | $592,434 | $710,921 | $829,408 | $947,895 |
| 30 | $122,466 | $428,838 | $575,299 | $719,123 | $862,948 | $1,006,773 | $1,150,598 |
Now we’re getting somewhere. I still think it would be a lean existence if your savings rate is 30%, but at least from here, things are more hopeful.
At a 70% or 80% savings rate you’re in decent shape for a modest life away from work.
Now, what if you’re an over-achiever and make double the starting average salary?
| Savings Rate – Double Average Income | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 22 | $110,520 | $35,008 | $46,677 | $58,347 | $70,016 | $81,685 | $93,355 |
| 23 | $116,046 | $73,682 | $100,576 | $125,720 | $150,864 | $176,008 | $201,152 |
| 24 | $121,848 | $119,994 | $162,570 | $203,212 | $243,854 | $284,497 | $325,139 |
| 25 | $127,941 | $173,085 | $233,628 | $292,034 | $350,441 | $408,848 | $467,255 |
| 26 | $134,338 | $233,761 | $314,828 | $393,535 | $472,242 | $550,949 | $629,656 |
| 27 | $141,055 | $302,919 | $407,368 | $509,210 | $611,052 | $712,894 | $814,736 |
| 28 | $148,107 | $381,553 | $512,577 | $640,721 | $768,865 | $897,010 | $1,025,154 |
| 29 | $155,513 | $470,766 | $631,930 | $789,913 | $947,895 | $1,105,878 | $1,263,860 |
| 30 | $163,288 | $571,784 | $767,065 | $958,831 | $1,150,598 | $1,342,364 | $1,534,130 |
Impressive. At such a high income, your likelihood of success goes way up.
It also makes it easier to save an even larger percentage of your paycheck each month since managing your expenses is independent of your salary.
At this point it’s certainly helpful to know how much you might expect a portfolio to grow, but what good is that without some guidance around spending without depleting your stash altogether?
How Much Income Will this Produce?
You have probably heard of the 4% withdrawal rule for retirement. It is commonly cited by FIRE enthusiasts as a guideline withdrawal rate to ensure you don’t deplete your savings entirely before you die.
However, you should bear in mind that the 4% rule was the product of a study that investigated the likelihood of a portfolio lasting 30 years.
If you retire at 30 that would give you until age 60 before your bucket of assets runs dry.
With average life expectancies in the U.S. running over 77, that leaves 17 bleak years of existence at a point in your life when returning to work may prove quite difficult.
In order to extend your portfolio, you’ll need to reduce your withdrawal rate.
So, we also calculated withdrawal rates of 3% and 2% for each of the portfolios we listed above.
To reduce the size of these tables we’ve only left the portfolio balance at age 30 for each given savings rate.
| Average Annual Income per Annual Savings Rate | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 30 | $81,644 | $285,892 | $383,533 | $479,416 | $575,299 | $671,182 | $767,065 |
| Withdrawal Rate | 2% Rule | $5,718 | $7,671 | $9,588 | $11,506 | $13,424 | $15,341 |
| 3% Rule | $8,577 | $11,506 | $14,382 | $17,259 | $20,135 | $23,012 | |
| 4% Rule | $11,436 | $15,341 | $19,177 | $23,012 | $26,847 | $30,683 | |
Because lowering withdrawal rates increases the likelihood that a given portfolio will last, we generally assume a withdrawal rate of 3% for people in their 50s, 2.5% for people in their 40s, and 2% for people in their 30s.
Based on the final portfolio value, I’m not optimistic about early retirement at a 30% savings rate.
Even at 80%, you could live on $30k+ with low enough expenses, but $15k per year? I wouldn’t recommend it unless you know you can do it.
Here are the withdrawal rates for above-average income.
| Savings Rate – 50% Above Average Income | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 30 | $122,466 | $428,838 | $575,299 | $719,123 | $862,948 | $1,006,773 | $1,150,598 |
| Withdrawal Rate | 2% Rule | $8,577 | $11,506 | $14,382 | $17,259 | $20,135 | $23,012 |
| 3% Rule | $12,865 | $17,259 | $21,574 | $25,888 | $30,203 | $34,518 | |
| 4% Rule | $17,154 | $23,012 | $28,765 | $34,518 | $40,271 | $46,024 | |
A little better. I’m seeing hope for those 80% savers.
Finally, the double average income withdrawal rates:
| Savings Rate – Double Average Income | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 30 | $163,288 | $571,784 | $767,065 | $958,831 | $1,150,598 | $1,342,364 | $1,534,130 |
| Withdrawal Rate | 2% Rule | $11,436 | $15,341 | $19,177 | $23,012 | $26,847 | $30,683 |
| 3% Rule | $17,154 | $23,012 | $28,765 | $34,518 | $40,271 | $46,024 | |
| 4% Rule | $22,871 | $30,683 | $38,353 | $46,024 | $53,695 | $61,365 | |
What if You Wait A Bit?
If you look back at the progressive growth of our hypothetical portfolio, you’ll notice that returns are starting to get very interesting as one approaches 30.
Even at the average income with a 30% savings rate, the growth reaches beyond $50,000 in the final year.
Due to the miracle of compounding interest, these portfolios are able to generate enough growth that the annual contributions from your income are eclipsed by your army of dollar bills which are recruiting more friends every day.
This is exciting stuff.
It also begs the question, is now (now being age 30) really the best time to retire?
What would happen if you waited 5, 10, or 20 years more to retire?
We ran the results forward for each of these periods. We assumed the growth of your income would slow a bit and have traded the 5% annual salary raise to 3.5% beginning at age 30.
Here is an idea of what you might expect your portfolio balance to be at the end of each year if you continue to work through age 50 and you had an average starting income at age 22 of $55,260.
| Savings Rate | |||||||
|---|---|---|---|---|---|---|---|
| Age | Income | 30% | 40% | 50% | 60% | 70% | 80% |
| 31 | $84,502 | $342,367 | $459,067 | $573,833 | $688,600 | $803,366 | $918,133 |
| 32 | $87,459 | $405,465 | $543,455 | $679,319 | $815,183 | $951,047 | $1,086,911 |
| 33 | $90,520 | $475,883 | $637,630 | $797,037 | $956,445 | $1,115,852 | $1,275,260 |
| 34 | $93,689 | $554,389 | $742,616 | $928,270 | $1,113,924 | $1,299,577 | $1,485,231 |
| 35 | $96,968 | $641,827 | $859,543 | $1,074,429 | $1,289,315 | $1,504,200 | $1,719,086 |
| 36 | $100,362 | $739,129 | $989,656 | $1,237,071 | $1,484,485 | $1,731,899 | $1,979,313 |
| 37 | $103,874 | $847,321 | $1,134,327 | $1,417,908 | $1,701,490 | $1,985,072 | $2,268,653 |
| 38 | $107,510 | $967,531 | $1,295,064 | $1,618,830 | $1,942,596 | $2,266,362 | $2,590,127 |
| 39 | $111,273 | $1,101,004 | $1,473,530 | $1,841,913 | $2,210,295 | $2,578,678 | $2,947,060 |
| 40 | $115,167 | $1,249,109 | $1,671,557 | $2,089,446 | $2,507,335 | $2,925,224 | $3,343,113 |
| 41 | $119,198 | $1,413,356 | $1,891,159 | $2,363,949 | $2,836,739 | $3,309,529 | $3,782,319 |
| 42 | $123,370 | $1,595,403 | $2,134,558 | $2,668,198 | $3,201,837 | $3,735,477 | $4,269,116 |
| 43 | $127,688 | $1,797,081 | $2,404,197 | $3,005,246 | $3,606,295 | $4,207,344 | $4,808,393 |
| 44 | $132,157 | $2,020,401 | $2,702,765 | $3,378,457 | $4,054,148 | $4,729,839 | $5,405,531 |
| 45 | $136,782 | $2,267,579 | $3,033,226 | $3,791,533 | $4,549,839 | $5,308,146 | $6,066,453 |
| 46 | $141,570 | $2,541,055 | $3,398,840 | $4,248,550 | $5,098,259 | $5,947,969 | $6,797,679 |
| 47 | $146,525 | $2,843,514 | $3,803,195 | $4,753,993 | $5,704,792 | $6,655,590 | $7,606,389 |
| 48 | $151,653 | $3,177,910 | $4,250,241 | $5,312,802 | $6,375,362 | $7,437,922 | $8,500,483 |
| 49 | $156,961 | $3,547,499 | $4,744,328 | $5,930,410 | $7,116,493 | $8,302,575 | $9,488,657 |
| 50 | $162,455 | $3,955,859 | $5,290,241 | $6,612,802 | $7,935,362 | $9,257,922 | $10,580,483 |
Dang. Compound interest is such a useful tool, isn’t it?
You may not have any interest in working and saving until you have $10MM. That’s fine. I don’t either.
The purpose of this exercise was directed more at helping us see the impact of a few extra years of working and saving on your overall portfolio balance.
I think this post is tabled out, but you can assume the above-average and double-the-average income growth rates continue to outpace the average results by the proportions in the sections above.
So, if FIRE is on your mind, be sure you really understand the impact that a few years here or there may have on your odds of success or even your comfort level.
Thoughts on Savings Rate and Income
There are many reasons one might want to FIRE and get away from the workforce by age 30.
Whatever your motivation, I would caution you against suffering through nearly a decade of pain for the sake of unbridled non-employed bliss.
First, I think it’s unhealthy to view work as a negative thing. If you really hate what you do, you will probably be happier if you just change employers or careers.
This is especially true in your 20s while you’re still gaining useful experience and the ability to make significant career changes is easier than it will be later in your career.
Life is too short to give nearly one-third or more of your waking hours to a job you hate; even if it is for only 9 or 10 years.
Also, don’t underestimate how miserable doing nothing can be. Many people grow depressed in retirement when they suddenly have more time than they can fill each day.
Without a plan for what you will do, you may feel useless, without purpose, and could grow depressed.
At least leave the door open for working longer or even doing part-time work in your early retirement.
You could also consider creating your own business in a field you love or try generating other passive income streams before you begin your early retirement.
I for one would not stop working until my portfolio was generating more income than my job does.
I know that may sound ultra-conservative, but remember, I don’t hate my job and this way when I do retire, I can do so with a high degree of confidence.
Thoughts on Withdrawal Rate and Expenses
Many people will look at some of the withdrawal rates we have calculated and scoff.
I would like to remind those people that there is more than one way to skin a cat and there is more than one way to retire.
Income is only one side of the retirement coin. Expenses are equally important, perhaps even more so because expenses will dictate your need for income.
First, if you really want to be financially independent by 30, I suggest figuring out your annual expenses by the time you turn 29 and giving it a trial run while you’re still working.
This should give you a very clear picture of how realistic your budgeting is.
Next, there is a lot of life left to live at age 30.
What if you have unforeseen medical issues? Wait. You have investigated the cost of health insurance, right?
What if you have kids? Do you have enough to maintain your home? Cars?
And a million other things we can’t think of.
I just want to caution you to think conservatively as you make estimates. Err on the side of caution because it is difficult to return to the workforce at the same capacity you left it once you’ve been gone for a while.
Measure two or three times before you make this cut.
Finally, most humans grow tired of a certain standard of living after a while. And the younger you reach financial independence and stop working, the longer you’ll have to grow bored with the lifestyle you’ve made for yourself.
I’m not trying to be a pessimist. Financial independence is the ultimate goal we want all of our readers to reach.
However, early retirement increases two major financial risk factors: time and income. You have too much time and you’re willingly stepping away from regular income.
Be sure you’re walking into this with your eyes wide open.
For more about FIRE, check out our post on various approaches to financial independence.
