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Millions of results will appear when you search for “early retirement” online, many of them are about retirees who actively saved and left the workforce before the age of 40.
However, the majority have a more reasonable goal in mind: based on a recent NerdWallet survey, Americans who have not yet retired but intend to do so say they intend to stop working full-time at the average age of 57. That is still considered early because it is ten years ahead of the full Social Security retirement age of 67, but it is still doable without having to make painful budget cuts. Here are five actions you can do to give notice ten years ahead of schedule.
Can I retire at 57?
Retiring at 57 is an ambitious goal that requires careful planning and financial preparation. While it may seem daunting, it’s certainly achievable with a well-structured plan and the right financial strategies. This guide will walk you through the key steps involved in retiring at 57, helping you navigate the challenges and maximize your chances of success.
Challenges of Retiring at 57:
- Income Gaps: You’ll need to bridge the gap between your retirement savings and the age when you can access Social Security (62) and penalty-free withdrawals from retirement accounts (401(k) and IRA).
- Healthcare Coverage: You won’t be eligible for Medicare until age 65, so you’ll need to plan for health insurance coverage during those eight years.
- Generating Income: Without access to your retirement accounts, you’ll need to find alternative sources of income during the early years of your retirement.
- Managing Early Withdrawals: If necessary, you’ll need to manage potential tax penalties and income implications associated with early withdrawals from retirement accounts.
- Savings Depletion: You’ll need to ensure your savings last throughout your retirement, especially considering the longer time horizon compared to a traditional retirement age.
How Much Money Will I Need to Retire at 57?
The amount you’ll need for retirement at 57 depends on several factors, including:
- Retirement Lifestyle: Your desired lifestyle and spending habits in retirement will significantly impact the amount you need to save.
- Life Expectancy: Consider your life expectancy to estimate how long your retirement savings need to last.
- Income Sources: Assess your expected sources of income during retirement, including pensions, Social Security, and investments.
A general rule of thumb suggests having 10 times your income saved by age 67. However, for early retirement at 57, you might want to increase this multiplier to 12, 15, or even 20 times your income, depending on your desired lifestyle.
Planning Your Retirement Budget:
- Analyze your current expenses and create a realistic retirement budget.
- Review your savings rate and adjust it to reach your retirement goals.
- Maximize contributions to your 401(k) and IRA, taking advantage of employer matches.
401(k) and IRA Withdrawals:
- 401(k): The rule of 55 allows penalty-free withdrawals from your 401(k) if you leave your job at age 55 or older.
- IRA: Early withdrawals from traditional IRAs before age 59 ½ incur a 10% penalty and income tax. Roth IRA contributions can be withdrawn penalty-free, but early withdrawals of earnings may incur penalties and taxes.
Social Security at 57:
You cannot access Social Security retirement benefits before age 62. Delaying benefits beyond full retirement age increases your monthly payout.
Healthcare Planning:
- Consider joining your spouse’s health plan if they’re still working.
- Explore COBRA coverage, but be aware of potentially high premiums.
- Research health insurance options through the healthcare marketplace.
- Investigate healthcare sharing plans as an alternative to traditional insurance.
Long-Term Care Planning:
- Medicare doesn’t cover long-term care, so consider Medicaid eligibility or purchasing long-term care insurance.
Additional Tips:
- Consult a financial advisor for personalized guidance and plan development.
- Consider an annuity to provide a steady income stream during the early retirement years.
Retiring at 57 is a challenging yet achievable goal with careful planning and proactive financial strategies. By understanding the specific challenges, calculating your required retirement savings, and exploring alternative income sources, you can increase your chances of a successful and financially secure early retirement. Remember to consult a financial advisor for personalized advice and support throughout your retirement planning journey.
Save more
You’ll need to save more money the earlier you want to retire. Experts typically advise saving between 2010 and 2015 percent of your pre-tax income for traditional retirement. For illustration, suppose you are 22 years old and earn $40,000 annually. If you save 10% of your income, receive an average annual return of 6% from your investments, and wish to retire at age 67, you could be able to leave the workforce with about $1. 13 million. That is probably sufficient, provided that you spend a minimum of 20%70% of your pre-retirement income each year in retirement and have a life expectancy of 85%. (All of this is based on the retirement calculator provided by NerdWallet, which assumes a yearly inflation rate of 3%, 2% annual salary increases, and a 5% investment return once retired.) ).
However, suppose you decide to retire at age 57. If all the same assumptions were made, your retirement income would only be about $570,000, which would not be sufficient to support you without significantly cutting back on your lifestyle in your later years. As per the calculator, in order to have enough money to retire at age57, you will need to save more than twice as much as you would have to earn, or roughly 2022 percent of your pre-tax income each year.
That’s a big difference, but if you want to retire early, you should start saving and spending less early in your career because it will allow your money to grow more slowly. Advertisement.
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Know your number
As per the survey, a greater proportion of Americans than one in five (22%) say they are unsure of how much retirement they will require comfortably. Replacing 20% of your pre-retirement income is a common rule of thumb, but you can adjust that based on your unique circumstances. For example, if you pay off your mortgage before you leave the workforce, you probably won’t need as much. Or if you plan to travel extensively after retirement, you may require more. Therefore, experiment with a retirement calculator or consult a financial advisor to determine what your ideal retirement age is.
I’m 57 with $700k: Can I Retire Early With My 401k and Social Security?
FAQ
How much money does a 57 year old need to retire?
|
Age
|
Average retirement savings (2022)
|
Median retirement savings (2022)
|
|
45 to 55
|
$313,220
|
$115,000
|
|
55 to 64
|
$537,560
|
$185,000
|
|
65 to 74
|
$609,230
|
$200,000
|
|
75 or older
|
$462,410
|
$130,000
|
What happens to my Social Security if I retire at 57?
Is retiring at 58 too early?
What is retirement age for 57?
How much money do you need to retire at 57?
You want to retire at 57 and plan to spend $3,000 a month in retirement, with a life expectancy to age 95. Based on those numbers, you’d need approximately $2.2 million in retirement savings. If you’re starting from $0 with savings, you’d need to set aside $2,000 a month and earn a 7% average annual return to have enough money to retire at 57.
Should I retire at 57?
The way you shape your financial plan can be very different if you plan to retire at 57, for example, versus waiting until age 65. While retiring at 57 might be your goal, you’ll need to understand what early retirement means when it comes to things like Medicare planning, retirement account withdrawals and Social Security.
Are you eligible for Social Security retirement benefits at 57?
The short answer is no, you’re not eligible to receive Social Security retirement benefits at age 57. The earliest you can begin taking Social Security for retirement is age 62. So if you plan to retire at 57 you’ll be waiting at least five years before you can claim those benefits.
Can you retire early at 55?
It is possible to retire early at age 55, but most people are not eligible for Social Security retirement benefits until they’re 62, and typically people must wait until age 59 ½ to make penalty-free withdrawals from 401 (k)s or other retirement accounts.