In the last few weeks I was reminded how important it is for those under 40 to get financial advice. The reasons why are pretty straightforward.

If you are under 40:

  • you still have a lot of time to get into a career that is really what you want to do and enjoy. As you get older, this becomes harder.
  • Generally speaking your best income earning years are ahead of you and as your kids get older your costs are also likely to go down.
  • Finally and most importantly, there is time to compound the benefit of any good financial decisions you make.

I believe it is possible for most people under the age of 40 to retire before they are 55. Sure there will be sacrifices, but having a plan allows you to prioritise things so you don’t have to sacrifice the things you enjoy.

Before I go any further, I want to clarify that while I am using the term retire, this doesn’t mean you have to stop working. Instead it means you have the freedom to do whatever you want and you don’t have to rely on working to generate an income.

Recently I have helped two different couples. They couldn’t have been more different in terms of their income, their lifestyle choices or how much they want to have when they retire. They both had the same goal though and that was to be debt free and be able to retire by the time they are 55. Given how different these two couples are, it highlighted to me that most people under the age of 40 can have the freedom to retire by the time they are 55 if they wish. All it takes is some planning.

Developing a plan goes through four stages. I have outlined each of these stages below as well as the key things you should do in each of them:


The first is exploring what you want your life to look like, both now and in the future. Going through this process helps you get a good idea about what is important to you. If done correctly, it also brings up things that you may not have considered, or did so but dismissed it as being unrealistic.

There are several ways to do this. The way that we prefer is to ask yourself the following questions:

  • If you won the lottery and you had no financial concerns for the rest of your life, what would your life look like?
  • If you knew you only had 5 years to live, what are the top 5 things you would do?
  • If you knew you only had 24 hours to live, what are the things you would regret not doing, wished you did more of, be most proud of, and miss the most?

Other things you could consider doing are to write down your normal day and your ideal day. Comparing these two will help you work out what you need to do more or less of.

Strategic plan

The second stage is developing a strategic plan that maps out how you can live the life you want. This helps you understand what things you can and can’t do and gives you the time to prioritise how you spend your money. You will also be able to see how much you need to save, how best to invest your savings and how much risk you need to take.

When developing your strategic plan, you should consider:

  • How to own your own home outright before you are 55. Having to pay rent in retirement will make it more difficult as your cost of living will increase over time.
  • If you want to retire at 55 but can’t access your super until you are 60, you will need to have another source of income. This does not need to be an income stream to fully fund your living as you could have an investment that you draw down on. For example if you require $60,000 for 5 years, you might need a $300,000 investment.
  • After you turn 60, the pension you take from your super is tax free. This should be maximised where possible.
  • Depending on your assets and income, you may be eligible for a part aged pension. Most people underestimate this or don’t factor it in at all as they believe the Government will scrap it. With an increasing number of retirees, it is unlikely the Government will get rid of it.
  • Your expenditure as you get older will reduce. Data shows that the top 25% of all 65 year old retired couples spend around $55,000 per year and this drops to $45,000 for 85 year old couples.
Financial Products

The third stage is making sure you have all of the right financial products. One of the best ways to make sure you can retire early and have the type of retirement most people can only dream of is to invest wisely. This means three things.

  • Firstly, you should put your money into investments that are likely to perform better than similar investments. Doing this is easier than most people in the financial industry would have you believe. All it takes is to invest in index funds or exchange traded funds. While they only give you the average returns, these average returns are still better than 75% of actively managed funds.
  • Secondly, make sure you have a diversified portfolio that is based on how much risk you need to take. Being diversified means having a selection of different assets such as property, shares (both Australian and International) and bonds. This is important as history has shown that it is impossible to predict which asset class will do the best in any one year.
  • Finally, cut out the fees wherever possible. Taking super for example, there are some good low fee options available, however very few people actually use them. A tip here is that if you are in the default investment option, even with the so called cheap industry funds (this includes the Government’s own PSSap), you are not minimising your fees. Aim for total fees of no more than 0.5%.

To demonstrate the power of smart decisions and the power of compounding, I will use my two couples that I recently helped as an example. Through our advice, their super is now in diversified low cost index funds likely to get better returns than 75% of the other funds. As a result of the lower fees, one couple will save $120,000 over the next 20 years and the other will save a massive $500,000.

The other thing to make sure you have covered is insurance in case anything goes wrong. You don’t want a plan that only works if you stay healthy. Having an independent financial adviser help with your insurance will mean you save around 30% of the cost of your premiums. This could be another $1,000 or more per year you can put towards your future.


The last part of the process is implementing your plan. This can be done with a financial adviser or in most cases, by yourself. While you should follow your plan, you don’t need to stick rigidly to it. However, it is important that you are honest with yourself and if it isn’t working you should review and change it. You should have some reference points built into it so that each year or two you know where you should be.

If you follow this process and get yourself a plan that includes low fee investments and insurance, you will be well on your way to being one of the few people that are able to retire by the time they are 55.

About the Author
Phil Harvey is an independent financial adviser. In 2017 Phil set up his company Construct Wealth to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers and a tax financial adviser, registered with the Tax Practitioners Board.

General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)