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How to Retire in 20 Years or Less


Planning for retirement is a massive and complicated undertaking. The details of what’s possible depend entirely on your personal circumstances. So if you’re asking yourself how you can retire in 20 years or less, that is a loaded question.

Twenty years from when? From age 45? Age 25? Are you starting from scratch or hoping to finish off an ongoing retirement plan? Are you a household of one or seven? Do you currently make $30,000 per year or $300,000? Once you’re in retirement, do you plan to live on $30,000 per year or $300,000? Here are a few issues to consider as you make your plans, no what your situation is.

If you want help planning for retirement, consider working with a financial advisor.

Budget For Monthly Savings

As with all financial goals, the best way to hit your retirement target is with careful budgeting. In this case, financial advisors recommend planning your retirement savings on a monthly basis.

Once you know how much you will contribute to your retirement fund each month, you can start to plan for income, savings and overall financial planning. From there, the exact numbers become more ambiguous.

Specifically, the question is how much you will need to save. You know that your target date is 20 years from now, but what retirement account will you want by then? As we note below, this will depend a lot on how much you plan to live on and when you want to retire. It also depends on what kind of returns you expect.

For example, say that you want to live on $100,000 per year and plan on keeping all of your money in the S&P 500. In that case, with the stock market’s average annual return of 10%, you could save up $1 million and live off a combination of returns and careful draw-downs on the principal.

But you’d need to plan for a much more aggressive rainy day fund so that you aren’t stuck with no income during down-market years.


On the other hand, you could want to insulate yourself from any drawdowns at all. In that case, you would want an income-investment portfolio that emphasizes bonds and annuities.  This is much more secure since you will effectively just collect paychecks from your portfolio indefinitely.

But you’ll also need a much larger portfolio saved up. If you want to duplicate that $100,000 per year income, with an average bond market return of 4% annually, you will need a portfolio closer to $2.5 million.

Calculating Your Savings for Retirement

A good place to start all of this is with SmartAsset’s investments calculator. With 20 years to save, and assuming that we’re starting from scratch, here’s what you would need to set aside each month to save up $1 million in your retirement account:

  • At a 10% return, the S&P 500 average, you would need to save about $1,325 per month
  • At a 4% return, common with bonds, you would need to save about $,2750 per month

If you want to save that $2.5 million in your retirement account over the next 20 years:

  • At a 10% return, you would need to save about $3,300 per month
  • At a 4% return, common with bonds, you would need to save about $6,800 per month

For most people, the $2.5 million mark is probably unachievable, especially if your retirement account is conservatively invested in bonds. However, a $1 million retirement fund is still a very comfortable amount of money, especially when paired with Social Security and Medicare.

It probably isn’t the best option for retiring early; if you want to retire in your 40’s, you will need much more than $1 million in the bank. But if you want to retire in your 60’s, that million-dollar account is entirely doable.

When Will You Retire?

Just to reiterate the point above, planning for retirement is entirely different depending on your age. If you are 45 and want to retire in the next 20 years, then you can anticipate programs like Social Security and Medicare.

With Social Security, depending on your lifetime earnings, you can expect up to several thousand dollars per month in additional income. With Medicare, you can plan for significantly reduced healthcare costs.

On the other hand, if you are 25 and planning to retire at 45, the math changes. You will need to budget for healthcare and can’t count on receiving Social Security benefits for years to come.

When you do receive Social Security, the benefits will be reduced because you won’t have contributed as much to the program. In other words, the earlier you plan to retire, the higher your costs and lower your income will be overall.

Set a Budget and Work Backwards

SmartAsset: How to retire in 20 years or less

To retire in the next 20 years, you will need to figure out how much money your retirement account needs. A good way to do that is by working backward.

First, determine how much money you need to replace your current income. A good rule of thumb is to plan for using your retirement account to replace 80% of what you live on now. So, for example, if you currently make $100,000 per year, plan for a retirement account that will generate $80,000 per year.

Now, it’s important to note that this doesn’t necessarily mean you have to replace your current income, just what you live on. This is particularly important for people who want to accelerate their retirement.

For example, say that you make $160,000 per year but live on only $80,000. You can plan for a retirement in which your account only needs to replace the income on which you live, in this case about $64,000 (or 80% of the $80,000 you spend).

Managing Account Returns

Plan for how you will manage account returns in retirement. From there, you can begin to set targets. The earlier you want to retire, and the more money you will need to replace, the larger your retirement fund will need to be.

With a sense of your goals, you can begin to set those monthly targets that will help you budget, save and invest wisely.

Maximize Every Fund

Depending on your employment, you may have access to a 401(k), a 403(b), an emergency fund or many other types of retirement accounts. Almost everyone can set up an individual retirement account (IRA) and Roth IRA as well.

Establish as many retirement funds as you can, and maximize your contributions to all of them. If you have an employer, this generally means you can have a 401(k) plan and an IRA/Roth IRA.

This won’t be enough on its own. The IRS places strict contribution limits on retirement accounts, so you probably can’t save enough to meet your full retirement goals using just tax-advantaged accounts in 20 years. You will also need a standard portfolio.

Tax-advantaged accounts are the best place to start though. They get you the most bang for your buck, so to speak. And you do have a lot of saving ahead of you.

Find Streams of Income

Building a retirement account relatively quickly will take a lot of money. For people with high incomes, finding that money isn’t a problem. The issue is keeping it. If you have a strong six-figure income, the next step is to begin economizing so that you can maximize your retirement savings.

If you don’t make that kind of money, though, the next step is finding it. Because unfortunately, the truth about building up a retirement fund is that you have to generate the money upfront.

A good way to build that kind of nest egg is through side work. Whether you get a part-time job, pick up gig work or even rent out your spare bedroom on Airbnb, side income can help enormously because it’s not part of your household’s line item. Your main job already pays all the bills, so work that you pick up on the weekend can go entirely into the retirement fund.

Adjust Your Spending

SmartAsset: How to retire in 20 years or less

In addition to building new income, you can also cut current spending. The less money you spend, the more you’ll have to put toward retirement.

Whether you want to hit the $1 million mark or need more than that, spending habits are a good place to start. Do you go out to eat often? Take big trips? Could you move to a smaller apartment or house?

All of these are areas where you can save money, and all of those savings can boost your retirement.

Bottom Line

Building a retirement account can be done in 20 years. The first thing to figure out is when you plan on retiring and how much money you’ll need. From there, it’s time to start aggressively budgeting so you have the spare cash necessary to fund this account well.

Tips on Retirement

  • Is it time to consider another stream of income? A financial advisor can help you make that decision. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • One part of planning for retirement is knowing how much money you’ll be getting from all sources, including the government. Find out how much you’ll get from Uncle Sam with our free Social Security calculator.

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