5 Things to Do in Your 20s to Retire in Your 50s

You're in your 20s. Chances are you are not thinking about retirement yet. However, future you will be thanking present you if you read through and think about implementing some of these tips. These could be key in giving you a leg up on that retirement lifestyle people dream about. Here are five things you could be doing in your 20s, so you can retire in your 50s:

1. Take Advantage of Compound Interest

If you set aside $5,000 per year, starting age 25, and it averaged 10% growth per year (the average S&P 500 return since inception) you’ll have $1.05 million by age 55. If you had set aside the same amount but started at age 30, you’d have just $619,000 at age 55. (For more, see: Investing 101: The Concept Of Compounding.)

The power of compound interest is impressive, and the concept is relatively simple. You are simply earning interest on interest. If the market averages 10% annual growth, eventually that “interest on interest” effect creates a steep upward slope.

See the illustration below for how this works:

The biggest advantage to investors in their 20s is in their investing time horizon. The earlier you can start investing, and the longer you can go without withdrawing your funds, the greater the effect that compound interest will have on your investment account.

2. Turn Hobbies into Business Ventures

What do you enjoy doing? This can be the key to a successful business venture. Look at Walt Disney, who as a child really enjoyed drawing. Look at Bill Gates. In the 8th grade he developed a love for computers and would be excused from math class so he could program video games. Look at Steve Jobs and Steve Wozniak who shared a love for technology in their early days as members of the “Homebrew Computer Club” and initially created the Apple computer without intending it to be a for-profit business venture. (For more, see: How to Make Early Retirement a Reality.)

Passion drives success.

3. Think Like An Entrepreneur

Some of the most successful entrepreneurs simply have an entrepreneurial mind. They are looking for voids in society and thinking about how to fill them.

Entrepreneurs are problem solvers. Anyone who is a natural problem solver will tell you, the first step in solving the problem is first recognizing the problem. I have a friend who thinks like this. A while back, he was frustrated at how difficult it was to dip fries in ketchup when eating french fries on the road. So he invented an attachment to a cup holder which holds ketchup.

Elon Musk, who founded Paypal, is a great example of this. Elon saw a void in the market for paying online and filled that void by creating Paypal. Entrepreneurs are successful when they can recognize a need which enough people have, and present a solution to this segment of the market.

4. Live Intentionally

What does it mean to live intentionally? It means getting out of your seat. It means turning off the TV.

Did you know that just 33% of wealthy individuals watch more than an hour of TV per day, while 77% of poor people do? And 86% of wealthy individuals love reading compared to just 26% of poor individuals. If you equate wealth to success and the ability to retire early, the key takeaway here is that wealth can be contributed to reading and learning, not watching TV.

5. Avoid (Most Types of) Debt

Is there such a thing as good debt? Some debt is unavoidable. And the argument can be made that some debt, such as student loan debt or business startup loans, can give you a leg up in earning potential. While this is true in some cases, one should tread very carefully.

Credit card debt is almost never a good idea and can typically be avoided if an individual implements proper planning and saving for a rainy day.

There you have it - five things you can do in your 20s so you can retire in your 50s. (For more, see: Saving for Retirement: The Quest for Success.)