Are You Hoping for The Stock Market to Fall? - Retire by 40 (2024)

FAQs

Should you retire when the stock market is down? ›

Plus, there are a few extra steps you can take to help lessen risk and retire more confidently. While it may feel easier said than done, “a volatile market shouldn't dictate whether or not you retire,” says Mindy Yu, director of investing at Betterment at Work.

Retiring early with $4 million is very possible, but requires some planning. Make sure you enter your retirement with a diversified investment portfolio, a smart budget and a plan for how to navigate the years before many traditional retirement benefits are available to you.

If you're starting to save for retirement at 40, that's not ideal, but it's also far from being too late. While the standard advice is to begin stashing away money for retirement in your early 20s, that's not what most people do, as it turns out.

By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.

The short answer is yes. One of the most daunting aspects of retirement is making sure you have enough money to live on until you die. With looming threats of Social Security cuts, longer life expectancy and rising health care costs, making your money go as far as it can is more important now than ever before.

Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.

You can probably retire at 55 if you have $4 million in savings. This amount, according to conventional estimates, can reliably produce enough income to pay for a comfortable retirement.

But it's considerably more so if you want to retire early. One rule of thumb recommends multiplying your desired annual income in retirement by 25 to come up with a savings goal. So, if you want to have $50,000 a year for 25 years, you'd need $1.25 million.

Summary. $5 million will successfully fund your retirement even if you decide to retire at 50, 40 or even 30. If you retire at the average retirement age, $5 million will provide you with over $170,000 annually.

Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.

Is retiring at 40 realistic? ›

Retiring at 40 may sound like a pipe dream. But it's entirely within reach if you save $1 million while working. The key elements for achieving this feat are sticking to a budget and implementing a comprehensive retirement strategy. But with rising expenses, is $1 million enough?

If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.

According to financial experts, you should have roughly three times your yearly salary in savings by the time you reach age 40. If you haven't reached this goal, don't worry, there's still plenty of time to start contributing.

“By the time you're 40, you should have three times your annual salary saved. Based on the median income for Americans in this age bracket, $100K between 25-30 years old is pretty good; but you would need to increase your savings to reach your age 40 benchmark.”

If you're retiring during a recession, consider withdrawing cash and fixed income opportunities first to allow stocks and other investments that are down to recover. During good years in the market, replenish your cash and fixed income buckets.

It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in the long term.

Experts with the Motley Fool suggest allocating an even higher percentage to stocks until at least age 50 since 50-year-olds still have more than a decade until retirement to ride out any market volatility.