How Much Do You Need to Retire at 55?

Retiring at 55 often means covering more years of expenses without immediate access to Social Security or penalty-free withdrawals. How much you need to retire at 55 depends on your expected expenses, lifestyle and life expectancy. While many retirees aim to replace 70% to 80% of their pre-retirement income, Fidelity recommends having 33 times your annual expenses saved if you plan to retire before age 62.

A financial advisor can help you create a financial plan for your retirement needs and goals.

Challenges to Retiring at 55

Retiring at 55 can present financial challenges that aren’t as prominent for those retiring later. A key challenge is the 10-year gap between retiring at 55 and becoming eligible for Medicare at 65. This often means purchasing private health insurance for a decade, a cost that can significantly impact retirement budgets.

Another concern is access to retirement accounts. Withdrawals from traditional IRAs or 401(k)s before age 59 ½ typically trigger a 10% early withdrawal penalty, unless you qualify for specific exceptions such as the Rule of 55 or Substantially Equal Periodic Payments (SEPP). 

Leaving the workforce at 55 can extend the period your savings must cover. The Social Security Administration estimates that a 55-year-old man will live another 27.6 years, while a woman can expect 30.8 more years. This suggests that retirement savings may need to support more than 30 years of expenses.

This amplifies the impact of inflation, market volatility, and sequence-of-returns risk. A longer retirement often calls for a larger nest egg or more cautious withdrawal strategies. Without sufficient preparation, these factors can strain long-term financial stability.

Lastly, early retirement can reduce your lifetime Social Security benefit since it’s based on your highest 35 years of earnings.

Retiring at 55: How Much You’ll Need

Fidelity suggests that individuals who plan to retire before age 62 should aim to save at least 33 times their anticipated annual expenses. The benchmark reflects the longer time savings must last and the delay in Social Security eligibility. For someone expecting to spend $60,000 annually in retirement, that would mean accumulating roughly $2 million in savings by age 55.

The 33x guideline reflects the extended period your portfolio will need to support withdrawals—potentially 35 to 40 years—while also factoring in inflation, healthcare costs and market fluctuations. It assumes a relatively conservative withdrawal rate to help your savings last across multiple decades. 

For context, Fidelity generally recommends having 10 times your annual income saved if you plan to retire at age 67. 

This rule of thumb can serve as a rough planning target for those retiring well ahead of traditional retirement age, but personal circumstances may call for adjustments. Variables such as location, lifestyle, debt obligations and whether you plan to work part-time can significantly affect the amount you’ll actually need.

Creating an Income Plan

An income plan helps retirees structure withdrawals to cover spending needs while managing taxes and preserving their portfolio over time. Many retirees aim to replace 70% to 80% of their pre-retirement income, which for someone earning $85,000 annually would translate to $60,000 to $68,000 in yearly retirement income.

Consider a hypothetical retiree with $1.5 million in savings—$500,000 in a taxable brokerage account, $300,000 in a Roth IRA and $700,000 in a traditional IRA—who plans to retire at 55 with $60,000 in first-year expenses. From age 55 to 59 ½, they might rely primarily on the taxable account to meet spending needs, using capital gains strategically to keep taxes low and avoid early withdrawal penalties. 

After 59 ½, they can begin drawing from the traditional IRA and spread out distributions to manage taxes. Roth IRA funds may be reserved for later years when healthcare or long-term care costs rise.

Delaying Social Security benefits until full retirement age or later can further strengthen their income stream, while the combination of account types provides flexibility in how income is generated over a retirement that could span three decades or more. This approach can help bridge the early retirement gap while preserving flexibility for future adjustments.

What If You Don’t Have Enough to Retire at 55?

If you’re aiming to retire at 55 but aren’t sure you’ve saved enough, here are three things to consider:

1. Cut Back on Spending

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. You can then invest the rest of your income to build your savings faster.

2. Save More

Whether you cut back expenses or downsize, you’ll still need to save more if you 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.

3. Build a Side Business that Generates 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’d also be responsible for repairs and maintenance when issues arise.

Bottom Line

Tips for Retirement

• If you want to retire by age 55, a financial advisor can potentially help you create a financial plan to reach that goal. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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’s free investment calculator to see how your money could grow, given a set rate of return.

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