If you’re thinking of retiring early, you may be wondering how much you need to retire at age 55. The exact amount of income you should have put away is going to depend on different factors. But if you want a general rule of thumb, financial experts say you should have saved a minimum of seven times your salary by age 55 for retirement. Here’s what you need to know.
A financial advisor can help you create a financial plan for your retirement needs and goals.
How Much to Retire at 55?
Fidelity estimated that those saving for retirement should have a minimum of seven times their salary by age 55. That means that if your annual salary is currently $70,000, you will want to plan on saving at least $490,000 saved. This is, as you would imagine, a ballpark estimate, and with inflation, by the time you retire, your salary will have gone up. The bottom line is that you need to save as much as you can for your retirement. Aiming for seven times your salary by age 55 may be a smart strategy. But experts note that there is no-one-size-fits-all solution, and depending on your time horizon and how much your retirement will cost, you may need to save substantially more.
But you shouldn’t only be thinking about how much money you need to retire at 55. Because you don’t want to outlive your retirement funds, you also should think about the life you will probably be leading during your retirement years. Here are five factors to consider:
Marriage. If you’re married, you’ll want to think about retirement planning for married couples. In other words, if you each have salaried jobs that make up your household budget, you should both ideally have saved at least seven times your salaries.
Location. If you live in a part of the country or plan to move somewhere with a high cost of living, you’ll need more income than if you live somewhere with a low cost of living. A cost of living calculator can help you determine where you may want to live during your retirement.
Do you have other income streams to supplement your savings? Presumably you do or will, like Social Security, a 401(k) or an IRA. If you do not have any additional income, you may want to hold off on retiring or perhaps live a life of semi-retirement, where you still work part-time.
Debt. Will your home be paid off when you retire at 55? Will you have significant credit card debt? If debt is going to weigh you down during retirement, you should try and resolve some of your debt issues before you retire early.
Travel and hobbies. You also may be perfectly fine retiring and staying put, or you may want to travel around the world in your retirement, which is going to require considerably more income than somebody who isn’t a wanderer. If you have expensive hobbies, like collecting art, you’ll want to factor that into your decisions about retiring early.
What If You Don’t Have Enough to Retire at 55?
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If retiring by age 55 is a goal and you are uncertain that you’ll have enough saved up, here are three things to consider:
Cut back your expenses. This may be time to become part of the F.I.R.E. movement,if you haven’t already. F.I.R.E. stands for Financial Independence Retire Early. This movement pushes people to trim their expenses to the bone and live off 25% to 50% of their income. With the extra money you have, you then invest it, in order to build up your retirement accounts.
Save more. Whether you cut back expenses or downsize, you still will need to save more, if you want to retire by 55 and feel your retirement accounts aren’t that robust. Many experts suggest putting aside 15% of your income every year, to save for retirement, and at least 10%. If you want to retire early but aren’t interested in the F.I.R.E. movement, you should at least try to save more than you currently are.
Create a side business that offers passive income. This strategy sounds easy but is often hard to do. Still, it is worth considering. For instance, if you bought a house and rented it out, that would be passive income you would receive every month, and if you have good tenants, it could be a profitable stream of revenue. You would have to be available to pay for and fix anything that goes wrong when your tenants run into home maintenance issues.
Bottom Line
Retiring at age 55 can be complicated but not out of reach. You should first consider how much money you have saved, whether you will have additional streams of income, how much debt will be paid off and if there are any steps to take to cut retirement expenses. If you fall short from your early retirement goal, you can always adjust your plan to reach those goals sooner than later.
If you want to retire by age 55, a financial advisorcan help you create a financial plan to reach that goal. SmartAsset’s free toolmatches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you plan on purchasing bonds and CDs to enhance your retirement savings, use SmartAsset’sfree investment calculatorto see how your money could grow, given a set rate of return.
On average, you'll need to have saved $1,051,814 to retire at 55 years old. This is based on the median earnings of Americans according to the Bureau of Labor Statistics' October 2023 Current Population Survey in weekly earnings.
On average, you'll need to have saved $1,051,814 to retire at 55 years old. This is based on the median earnings of Americans according to the Bureau of Labor Statistics' October 2023 Current Population Survey in weekly earnings.
It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.
If you have multiple income streams, a detailed spending plan and keep extra expenses to a minimum, you can retire at 55 on $2 million. However, because each retiree's circ*mstances are unique, it's essential to define your income and expenses, then run the numbers to ensure retiring at 55 is realistic.
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.
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
$700k can last you for at least 25 years in retirement if your annual spending remains around $40,000, following the 4% rule. However, it will depend on how old you are when you retire and how much you plan to spend each month as a retiree.
However, you unfortunately cannot begin receiving Social Security retirement benefits at 55. The earliest age you can begin drawing Social Security retirement benefits is 62. But there's a catch. Taking Social Security benefits prior to reaching your full retirement age results in a reduction of your benefit amount.
You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
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.
This effectively means the top 1% are those with more than $10 million (~25m) and the top 0.1% are those with roughly $1 billion. There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more. I very much doubt that any of them have that amount in savings.
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.
Americans have lofty goals for their retirement, with the typical worker believing they need $1.46 million to retire comfortably — a jump of 53% from their savings target in 2020, according to a new survey from Northwestern Mutual.
Putting that much aside could make it easier to live your preferred lifestyle when you retire, without having to worry about running short of money. However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
This is where the rule of 55 comes in. If you turn 55 (or older) during the calendar year you lose or leave your job, you can begin taking distributions from your 401(k) without paying the early withdrawal penalty. However, you must still pay taxes on your withdrawals.
If you have $1.5 million saved and aim to retire at 55, you can. However, this depends on your withdrawal rate – how much you consistently take from your savings – and how long you live. The 4% withdrawal rule suggests taking 4% of your initial nest egg in year one, adjusting for inflation yearly.
Retiring at an age as young as 55 is a dream of many Americans. However, turning this vision into reality involves some significant financial planning and maneuvering. For example, you'll need to build significant savings, invest your money, account for early withdrawal taxes and take a lot more into consideration.
Yet you can still retire by 65, even if you're a quintessential challenge case: a 50-year-old with just $100,000 in savings. Yes, for the majority of people that's far less than six times your current salary, as recommended by Fidelity Investments based on your age.
Retiring at 55 is something of a lofty goal but it's achievable with the right financial plan in place. When considering early retirement, remember that it can affect how much you need to save and where you'll need to keep those savings.
Introduction: My name is Annamae Dooley, I am a witty, quaint, lovely, clever, rich, sparkling, powerful person who loves writing and wants to share my knowledge and understanding with you.
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