Can I Retire at 55 With $2.5 Million?

Retiring at 55 with $2.5 million in savings puts you in an enviable financial position. While $2.5 million provides a significant head start, it’s still a good idea to create a detailed plan to ensure your wealth supports you comfortably through potentially 30 or more years of retirement. Retiring before Medicare eligibility and delaying Social Security benefits in particular requires some strategic maneuvering.

A financial advisor can help you create a workable retirement strategy.

Is $2.5 Million Enough to Retire at 55?

With $2.5 million saved, you would be entering retirement from a very strong financial position. Only about 1 in 10 retirees have even $1 million saved, according to the Federal Reserve’s Survey of Consumer Finances. Applying the 4% rule, you could safely withdraw about $100,000 annually in your first year of retirement, adjusting that amount upward each year for inflation.

If you prefer a more cautious approach, withdrawing 3% would generate $75,000 annually, helping to preserve your portfolio over an even longer retirement. Alternatively, a 5% or 6% withdrawal rate could deliver $125,000 to $150,000 per year. Although, this does increase the risk of depleting your savings earlier if markets underperform.

However, an annual income of $100,000 is well above the average salary of $60,944 earned by people aged 55 to 64 who are still working. Many retirement planners also suggest using 70% of pre-retirement earnings as a starting point when budgeting for spending in retirement.

With that in mind, 70% of $60,944 is $42,661, meaning $100,000 a year is likely more than adequate income for the typical single retiree or even a married couple. Even when using the 90% income replacement figure at the high end of the range used by retirement planners, $100,000 is not far off the mark.

Partnering with a financial advisor can help you determine a withdrawal rate that works for you.

Other Factors Affecting Retirement at 55 With $2.5 Million

Several important factors beyond your savings balance will influence the success of your early retirement.

Retirement Portfolio Basics and Taxes

At 55, you can access your IRAs and 401(k)s penalty-free through substantially equal periodic payments (SEPPs), according to rule 72(t) of the Internal Revenue Code. Or you might rely more heavily on taxable brokerage accounts to bridge the gap until age 59.5. Strategic withdrawals — tapping taxable accounts first to allow tax-advantaged accounts to continue growing — can also help minimize your tax bill over time.

If you sell assets in a brokerage account, you may incur long-term capital gains tax, typically 15% for most middle- and upper-income retirees. For example, realizing $60,000 in long-term capital gains might cost around $9,000 in taxes. Smart tax planning can stretch your $2.5 million even further.

Our free capital gains tax calculator can help you manage your tax liability.

Location and Lifestyle

Where you live matters. Choosing a state with no income tax — like Florida, Texas or Nevada — can help maximize your retirement income. Similarly, relocating to areas with a lower cost of living could allow you to spend significantly less annually without sacrificing lifestyle quality.

Luxury living in an expensive city could burn through your savings faster, while a modest lifestyle in a more affordable region could help your portfolio last longer.

Inflation

Inflation consistently reduces purchasing power over time. Even modest 2-3% inflation can double your living costs over a 25-30 year retirement. Maintaining a portion of your portfolio in growth-oriented investments like stocks can help you keep pace with rising costs.

Health and Longevity

Healthcare is one of the biggest financial challenges for early retirees. Without Medicare until 65, you’ll need private health insurance, which could easily cost $10,000 annually (according to estimates from SmartFinancial), depending on your location and coverage level.

Longevity is another important consideration: If you live into your 90s, your retirement savings need to last 35-40 years. Don’t overlook planning for healthcare expenses and potential long-term care.

Retiring at 55 With $2.5 Million – Social Security and Medicare

A couple enjoying retirement, having retired at 55 with $2.5 million.

While you can begin claiming Social Security at age 62, delaying until full retirement age (66-67) — or even age 70 — dramatically boosts your monthly benefit. This can provide much stronger financial support later in retirement when healthcare costs typically rise.

To show you what we mean, let’s take a look at an example using 2025 data from the Social Security Administration. If you retired this year, here’s how much your maximum monthly benefit would be depending on your age:

Age 62 (Early Retirement): $2,831
Full Retirement Age: $4,018
Age 70 (Delayed Retirement): $5,108

Medicare, on the other hand, doesn’t kick in until age 65. That means covering 10 years of private health insurance premiums, deductibles and out-of-pocket medical expenses — something your retirement budget must accommodate.

Create a Retirement Budget

Here’s an example of an annual retirement budget for a 55-year-old with $2.5 million saved, using a 4% withdrawal rate ($100,000 per year):

Housing (Mortgage/Rent, Taxes, Insurance): $24,000
Utilities and Household Expenses: $5,400
Groceries and Dining Out: $12,000
Healthcare Premiums and Medical Costs: $12,000
Transportation (Car, Gas, Insurance): $7,000
Travel and Leisure: $15,000
Miscellaneous and Emergency Fund: $24,600

Total Annual Expenses: $100,000

This kind of budget can allow for a comfortable lifestyle. For comparison, the median price of rent comes in at $16,800 a year, according to LendingTree. The budget above allows room to live in a median cost-of-living area, travel, hobbies and occasional splurges — but careful attention to rising healthcare and living costs is still important.

Managing a $2.5 Million Portfolio at 55

At 55, your investment strategy must balance growth and protection. A sample asset allocation might look like:

50-55% equities for growth
35-40% bonds and fixed income for stability and predictable cash flow
5-10% cash or cash equivalents for liquidity

Including dividend-paying stocks, municipal bonds (for tax-free income) and low-cost ETFs can provide diversified sources of income while managing risk.

Ongoing rebalancing and periodic withdrawal strategy reviews will ensure your portfolio remains aligned with your evolving needs.

Annuities

Annuities can serve as a supplemental income source, providing predictable cash flow. Purchasing a deferred income annuity now could secure guaranteed payments beginning at age 65 or 70, reducing pressure on your portfolio later.

However, it’s important to weigh the pros and cons carefully, as annuities come with fees, surrender charges and less liquidity compared to traditional investments.

Bottom Line

A man determining if he can retire at 55 with $2.5 million.

Retiring at 55 with $2.5 million gives you considerable financial freedom, but long-term success still hinges on thoughtful planning. You’ll need to account for inflation, healthcare costs, delayed access to government benefits and market volatility to make your savings last 30 to 40 years.

Retirement Planning Tips

The combination of uncertainty about the future and a wide array of potential strategies can make it difficult to plan effectively for retirement without the help of a financial advisor. SmartAsset’s free tool matches you with up to three 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.
Even if you can’t know exactly what will happen between now and retirement, SmartAsset’s retirement calculator can help you produce a reasonable forecast. To use it, enter your details including location, income, age you plan to start taking Social Security benefits, current monthly savings amount and other information. The calculator will tell you how much income you’re likely to need in retirement, how much Social Security will contribute and how much you need to have saved by the time you stop working.