How young Australians can actually retire early

To the average Aussie, the idea of an early retirement may seem like an impossible dream, but it may not be as difficult as people think.

For young Aussies, the idea of retiring early may seem like an impossible dream, but it may not be as far-fetched as it seems.

In today’s economic climate, with rising interest rates, the cost of living crisis and skyrocketing inflation, many Aussies are struggling to just pay their rent.

Therefore, the idea of retiring early probably isn’t something many are even considering right now – but a group of experts have revealed the simple steps people can be taking to move towards that goal.

At just 26, Natasha Etschmann, is well on her way to achieving this goal and she says it’s “not as hard” as some may think.

Speaking on a panel at SXSW Sydney last month, the personal finance content creator, who has more than 62,000 followers on her TashInvests Instagram account, revealed investing is one of the key tools she is using to reach her financial goals.

She started investing in Exchange Traded Funds (ETFs) when she was 18, which are essentially a bundle of assets and securities such as different stocks and bonds.

Perth local Natasha Etschmann started investing when she was 18. Picture: @tashinvests/Instagram

They are different to stocks, with the latter representing a piece of ownership in a publicly traded company, while a single ETF can dozens or hundreds of different stocks or bonds.

“I always wanted to work in healthcare, but there’s an income ceiling that comes with that. I wanted to find a different way to make money,” Ms Etschmann explained.

Her smart financial decisions meant she was able to save up enough money to buy her own apartment in Perth when she was just 22.

Ms Etschmann said one thing that really helped her on her investment journey early on was learning about compound interest and that you “don’t need to invest that much” to see good returns.

“It’s really not that hard if you buy everything, if you’re buying index funds, you don’t need to pick one stock,” she said.

“I never wanted to sit there and research individual stocks. I find that very boring.”

Another thing the 26-year-old found out early on was that investing is “not as risky’ as she initially thought, noting picking an ETF or index fund is not like “gambling”.

However, Ms Etschmann noted there were other financial steps people needed to take first before they can start focusing on their investing journey.

Paying off higher interest debt like credit cards or personal loans should be a priority, she said.

There are steps young Aussies can take if they want to work towards early retirement. Picture: iStock

Brandon van der Kolk is another young Aussie who decided that simply working and having a super fund wasn’t going to be enough to earn live the kind of life he wanted.

He first realised he needed another income stream when he was in his final year of university to become a physiotherapist.

Mr van der Kolk said he started to look at the type of salary he would likely be earning and he “wasn’t happy”.

“So I started getting interested in ways to turn my money into more money,” he said, which led him to the stock market.

When he first started investing it was what is called “active investing”, meaning he was buying and selling individual stocks.

He admited that he “didn’t know” what he was doing at first, which led him to losing money before his uncle convinced him to try “passive investing” through the likes of ETFs.

As a result of his experience, Mr van der Kolk decided to make YouTube videos so he could share his investing mistakes and knowledge with a wider audience.

So, in 2017, his channel New Money was born, which is now one of Australia’s largest investing YouTube channels, with more than 830,000 subscribers.

Brandon van der Kolk runs the New Money YouTube channel. Picture: New Money/YouTube

In 2019, he made the decision to leave his career in physiotherapy and go “all in” on his investing channel.

He encouraged Aussies to “do whatever resonates with you the most’ when it comes to working towards financial freedom.

So, while for some people starting their own business may be the key to that, for many others it will be something more passive, like investing.

“For the vast majority of people, getting towards early retirement is just down to investing,” he said, but added that investing can be more of a “long term game”.

He suggested that anyone who is looking to “accelerate” that timeline, then creating a business or focusing on content creation was a great way to do it.

“I think that content creation as a business, it’s very appealing. Everybody can do it because you can just hold your smartphone and plant in your face and talk about what you want to talk about,” he said.

Earlier this year, it was revealed that Aussies who want to retire “comfortably” should have at least $595,000 in their super account by the time they stop work, according to the Australian Super Funds Alliance’s (ASFA) latest retirement standard.

This jumps up to $690,000 for couples.

That’s a yearly spend of $69,691 per couple and $49,462 for a single person.

However, there are those that believe having a truly comfortable retirement will require a lot more savings than that.

Financial planner Andrew Tratt from Australian Wealth Advisers claimed the lifestyle offered by ASFA’s standard $70,000 per year for a couple sounds “horrible”.

“Most couples would want $80,000-$100,000 of expenditure per year to have a modest lifestyle,” he said.

“That’s not being extravagant, if you think about it’s really $1,000 a week for bills and living and then a $20,000 holiday at the end of the year.

“That doesn’t include incidentals or helping out the family or the kids or things like that.”

Mr Tratt believes those who wish to retire comfortably should have at least one million dollars in their super account.