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 circumstances. So, if you’re asking yourself how to 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, regardless of your situation.

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

1. Budget For Monthly Retirement 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 drawdowns 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.

Protect Yourself From Drawdowns

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.

However, 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 typical 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 $2,750 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 40s, you will need much more than $1 million in the bank. But if you want to retire in your 60s, that million-dollar account is entirely doable.

Know When You 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.

2. 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).

Manage Your 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.

3. 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 a 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 savings ahead of you.

4. Find Different 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.

5. Adjust Your Spending, as Needed

Achieving your goal to retire in 20 years or less requires regular assessment of your spending habits. Your daily financial choices directly impact your retirement timeline. Consider tracking expenses for a month to identify areas where you can cut back without sacrificing quality of life. Small adjustments, like brewing coffee at home or reducing subscription services, can translate to thousands of dollars in savings annually.

Mindful spending doesn’t mean eliminating all enjoyment from your life. Instead, it encourages prioritizing expenses that align with your values and retirement goals. Before making significant purchases, implement a 48-hour waiting period to determine if the item is a want or a need. This simple practice can prevent impulse buying and keep your retirement savings on track.

As your income increases throughout your career, resist the temptation to proportionally increase your spending. Maintaining your current lifestyle while earning more creates a powerful opportunity to accelerate your retirement timeline. Many successful early retirees live well below their means, allowing them to save 40-50% of their income and significantly shorten their path to financial independence.

Consider scheduling quarterly reviews of your spending patterns to ensure alignment with your retirement goals. These check-ins provide opportunities to celebrate progress and make necessary adjustments. If you find yourself consistently overspending in certain categories, develop specific strategies to address these challenges rather than abandoning your retirement timeline altogether.

Bottom Line

Retiring in 20 years or less is an achievable goal with proper planning and disciplined execution. The journey requires a combination of strategic saving, smart investing, and lifestyle adjustments that align with your retirement vision. By maximizing retirement accounts like 401(k)s and IRAs, you can leverage compound interest and tax advantages to accelerate your wealth building. Additionally, creating multiple income streams through side hustles, real estate or dividend investments can significantly shorten your path to financial independence.

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 vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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.