Many millennials want to retire early. No longer content with merely working until their 60s, they envision a future where financial independence grants them to pursue passions, travel across the globe, or simply enjoy life on their own terms. But beyond the aspirational headlines and the dream of millennials retiring early, what does it really take to make this a reality? The pressing questions on many minds are: how much money will millennials need to retire, and perhaps more importantly, how will millennials retire given today’s economic landscape?
At The Harmony Group, with over 15 years in the investment space, we understand that achieving such a goal requires strategic planning, disciplined execution, and a clear understanding of the numbers. Today, we’ll attempt to answer the critical questions raised above, moving beyond the hype to the practicalities of how much millennials should save for retirement to have a financially independent future.
Defining “Early Retirement” for Millennials
For millennials, born roughly between 1981 and 1996, “early” might mean anything from their 40s to their late 50s. Also, early retirement doesn’t always imply a complete cessation of work. Some millennials simply want to reach the point where passive income covers their living expenses, allowing them to choose if, when, and how much they work. This concept is popularised by Peter Adeney’s “FIRE” (Financial Independence, Retire Early) movement, which itself has nuances:
- Lean FIRE: Living a highly frugal lifestyle, often with minimal expenses.
- Comfortable FIRE (or just FIRE): Maintaining a comfortable, but not extravagant, lifestyle.
- Fat FIRE: Requiring a much larger nest egg to support a luxurious or high-spending lifestyle.
- Barista FIRE: Reducing work hours significantly but still earning some income to cover discretionary expenses or health insurance.
The desired retirement lifestyle directly dictates the capital required, and for many Australian millennials, this might also involve “micro-retirements” or flexible work arrangements rather than a full stop.
The Core Equation: Your Annual Expenses Multiplied
There’s no single ‘magic number’ that applies to everyone. Your desired retirement lifestyle, current spending, and expected longevity are the true determinants. This leads us to the crucial question: How much money will millennials need to retire to support a desired lifestyle for potentially 40, 50, or even 60 years?
A common guideline in the FIRE community is the 4% Rule. This suggests you can safely withdraw 4% of your investment portfolio’s initial value each year, adjusted for inflation, without running out of money. To calculate your target nest egg, multiply your annual expenses by 25 (the inverse of 4%). But there are caveats:
- Longer Time Horizon: The 4% rule was largely based on a 30-year retirement. If you retire in your 40s, you’re looking at a 40-60+ year retirement. A more conservative withdrawal rate, such as 3% or 3.5%, is often recommended to account for this extended period and provide a greater buffer. This means multiplying your annual expenses by 33.3 or 28.5, respectively.
- Inflation: Over decades, inflation significantly erodes purchasing power. A robust portfolio must grow at a rate that outpaces inflation. Also, keep in mind that the 4% rule assumes a relatively conservative portfolio, so a different composition portfolio might require you to have a lower withdrawal rate.
- Market Volatility (Sequence of Returns Risk): If you’re an early retiree, you may be more vulnerable to market downturns. That’s because poor investment returns early in retirement can severely impact your fund’s longevity, even if overall long-term returns are good.
- Taxes and Fees: These are real costs that reduce your effective withdrawal amount and must be factored into your annual expenses.
Before any calculations, you need to assess your current and projected future annual spending. The ASFA (Association of Superannuation Funds of Australia) Retirement Standard provides useful benchmarks for a modest or comfortable retirement. As of the December Quarter 2024, ASFA suggests approximately $73,077 per annum for couples and $51,805 for singles for a comfortable retirement. These figures, however, typically do not factor in supporting dependents, a reality for many millennials. Beyond these basics, remember to account for healthcare, travel, hobbies, and even potential support for elderly parents or adult children—a “generational squeeze” impacting many Australian millennials.
Crunching the Numbers with Illustrative Scenarios
Let’s crunch some numbers to answer the question, “How much should I have to retire at 40, 50, or any age before traditional retirement?” based on different lifestyle choices, using a more conservative 3.5% safe withdrawal rate. So, the formula for your estimated nest egg is to multiply your annual expenses by approximately 28.5714 (the inverse of 3.5%).
| Retirement Scenario | Illustrative Annual Spending | Estimated Nest Egg Needed (using 3.5% withdrawal rate) | Description of Lifestyle & Considerations |
| Lean FIRE | $40,000 | $1,142,857 | This retirement lifestyle requires significant frugality. That means potentially living in a lower-cost-of-living area and minimising discretionary spending. |
| Comfortable FIRE | $70,000 | $2,000,000 | This allows for a comfortable standard of living, including regular leisure activities and some travel, without excessive luxuries. |
| Fat FIRE | $100,000+ | $2,857,143 | This supports a more luxurious lifestyle, frequent travel, dining out, and higher discretionary spending. This brings us to a common question: is $3 million enough to retire in Australia comfortably? For this Fat FIRE lifestyle, yes, it could be a strong foundation, but you also need to consider longevity, inflation, and any unforeseen circumstances that might arise over decades. |
Important Disclaimer: These are illustrative figures. Your circumstances, desired lifestyle, health, and market conditions will ultimately determine your specific requirements.
Strategies for Millennials Who Desire Early Retirement
Understanding how much money millennials need to retire is only half the battle. The other crucial piece is understanding how millennials will retire—what strategies and actions are required to build that substantial nest egg?
Aggressive Savings Rate
Achieving early retirement often requires saving 50-70% or even more of your income, far beyond the typical 10-15% often recommended for traditional retirement. While average millennial savings rates in Australia hover around $46,676.40, this needs to be a higher percentage of annual income to hit early retirement targets. This directly answers how much millennials should save for retirement consistently—as much as humanly possible while maintaining well-being.
Maximising Investment Growth
Saving up for an early retirement may not be enough. If you’re a millennial trying to retire early, you may have to invest a chunk of your savings and maximise it. Here are some things to keep in mind:
- Compound Interest: The undeniable power of starting early cannot be overstated. Every dollar invested today has decades to grow exponentially.
- Asset Allocation & Diversification: During the accumulation phase, especially for millennials with a long runway, a growth-oriented portfolio (e.g., equities, strategic property) is vital. Also, never put all your eggs in one basket. A balanced investment portfolio helps mitigate risks.
- Property Investment: Strategically acquired properties can provide not only capital growth but also passive income streams that can support early retirement. While the average millennial net worth in Australia (KPMG, January 2025) sits around $757,000, with an average housing wealth of $750,000, this indicates many already leverage property to boost retirement funds. The key is property investment that maximises returns and minimises debt burden.
Income Generation Beyond Traditional Employment
Diversifying income streams isn’t just about earning more; it’s also about creating multiple avenues to generate wealth and gain financial independence earlier than expected. We’ve already touched on investments above, but don’t hesitate to explore other avenues, such as side hustles or leveraging your unique skills.
Frugal Living & Mindful Spending
The FIRE movement strongly advocates for reducing expenses. This isn’t about deprivation but about distinguishing between necessities and mindful discretionary spending. Every dollar saved and invested is a dollar that starts working for you.
Debt Management
High-interest debt is an anchor that can weigh your early retirement plans down. Strategically paying down credit card debt and personal loans and even aiming to be mortgage-free can significantly free up capital for investments.
Superannuation
While superannuation is typically accessible at age 60 or later, it’s a vital component of a comprehensive retirement plan due to its tax-advantaged nature. Early retirees will need supplementary funds to bridge the gap until superannuation can be accessed. However, consistent and early contributions can build substantial balances. It’s fascinating to note that in 2021-2022, 178 Australians under 30 already had over $2 million in their superannuation accounts, showcasing the power of early, aggressive contributions.
Planning for Healthcare
Healthcare cost is a major consideration for early retirees. That’s because once you retire, you will no longer have employer-sponsored health benefits. As you manage your investments and other income-generating avenues, be sure to budget for private health insurance and understand the public health system.
Retiring Early Must be a Realistic Journey, Not a Race
It’s not about being lucky. If anything, it’s about being prepared and persistent. The path to an earlier, financially independent future is within reach for millennials willing to commit to the journey and take consistently disciplined actions. Simply put, you can take control of your financial future—the life you want to live is yours to build.
We’re Your Partner in Property-Led Wealth Creation
As mentioned, achieving early retirement requires more than just saving; it demands astute investment, including real estate. At The Harmony Group, we can help you acquire investment properties that align with your early retirement goals. We can help with:
- Capital Growth: Building substantial equity over time as property values appreciate.
- Rental Income: Generating passive cash flow to cover living expenses, reducing reliance on your core investment portfolio.
- Leverage: The ability to use borrowed money to amplify returns, a powerful tool when managed responsibly.
- Diversification: Acquiring a tangible asset that can balance a stock-heavy portfolio, offering stability and tangible value.
Contact us today for an initial consultation or any questions you may have.
