Retirement planning can start at any age, but it’s even better if you start young. That’s why it was refreshing to see this post from a 24-year-old Redditor who is setting long-term financial goals and knows how they wants to retire.

The Redditor wants to retire at 55 with a $5 million net worth in North Carolina or an area with a similar cost of living. The Redditor currently has a $25,000 cash position, $60,000 in his investment accounts, a $65,000 annual salary with the possibility of an upcoming promotion, and a $10,000 bonus.

The individual saves 25% of his income, so if you include the bonus, they’re putting away about $19,000 per year. 

The Math for His Current Investments

Let’s assume the Redditor contributes $19,000 per year into their investment accounts and generates an annualized 8% return. This Redditor is starting out with a $60,000 portfolio, which will work to their advantage.

Using an investment calculator, we can see that the 24-year-old Redditor will end up with a $3.0 million portfolio by the time they turn 55. That’s a bit short of the $5.0 million objective but is still quite respectable.

However, the Redditor knows that they need to boost their income. Even better, the Redditor is seeking a promotion and is looking for additional opportunities. The $19,000 annual contribution should grow over time as the Redditor develops more skills and advances in their career.

The Redditor has been brainstorming ways to get ahead, including a new job or starting a business. The individual also mentioned going to grad school and getting an MBA, but student debt makes the ROI very questionable. Incurring that extra debt can also hinder the Redditor’s path to a $5 million portfolio by the age of 55.

Income and Expenses Change

Your 20s are the best years to make money. At this point in your life, you have the fewest responsibilities that you will ever have. This is the time to hustle, and it’s good to see that the Redditor has that mentality.

Picking up a side hustle and learning new skills is critical at this stage. That’s because in your 30s and 40s, you may be raising a family, taking care of your older parents, or doing both. Also, if you are living with your parents in your 20s, your total expenses aren’t always going to be that low.

You can review expenses, create a budget, and work hard to keep costs low. However, you’ll get the best results if you focus on increasing your income because there are only so many expenses you can cut before getting to the essentials.

Doubling their income by taking on additional work while keeping expenses the same will get the Redditor there much faster. Even if you can’t contribute as much in your 30s and 40s because of the commitments of raising a family, front-loading the contributions and earnings in your 20s will put you in a better position.

Progression Is Normal

Reaching a $5 million portfolio at 55 may seem daunting, but people’s income tends to grow over time, especially if they continue to pursue new opportunities. Most people don’t start with big inheritances, and it’s gradual contributions that help them reach the finish line. 

Retirement is a long-term journey. You probably won’t reach your goal in 5-10 years, and it may seem unfathomable with your current income and expenses. However, it’s also easier to advance in your career during your 20s since you have more free time. Earning an extra $10,000 per year will add up to your investment portfolio, and growing your income even more will get you closer to your goals.

Most importantly, progression becomes more normal for people who have more reasons to achieve success. The Redditor has a clear vision of what they want when they retire. Setting goals around the type of family you want to lead can motivate people in their 20s to work even harder, as parenthood is typically closer around the corner than retirement.

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