Can You Really Retire at 55?

You can retire early with disciplined financial planning.

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Retiring at age 55 is in the realm of possibilities if you save smartly and with discipline and start early enough. The key is to understand your needs and make optimal use of the various investment options and tax advantages available. Don’t rely solely on Social Security, but don’t forget to include it in your estimates. If you set goals and follow a well-laid-out retirement savings plan strategy, you can enjoy an early retirement.

Establish a Goal

Determine how much income you will need when you retire. Keep in mind that you can expect fewer expenses in retirement, such as a paid-off mortgage and no investment contributions, so your income needs decrease. One calculation method, called the replacement ratio, generally uses 70 percent of your income right before retirement. For a more realistic estimate, increase your income to age 55 to account for inflation. At a 1.5 percent inflation rate, for example, your income could rise by 45 percent between ages 30 and 55.

How Much Money

You need to get an idea of how much money you should have in savings at age 55 to generate your target income. Take into account any projected pension from your work and, down the road, Social Security payments. One method to estimate your required accumulated savings is the 4 percent rule. The method assumes that if you withdraw 4 percent of your assets every year, you should have enough money well beyond your life expectancy. To use this rule, divide the remaining annual income you need, after factoring in private and government pensions, by 0.04.

Start Saving

To retire as early as possible, you have to start saving as soon as possible. Make a goal for yourself of saving at least 15 percent of your income regularly. With every paycheck, make an investment contribution to keep the contribution amounts manageable. Use tax-advantaged plans as much as possible. Contribute to your 401(k) plan at work, especially if your employer matches your contributions; that is like getting free money for your retirement plan. Open an individual retirement account to get even more tax advantages. Your pretax contributions to a 401(k) and traditional IRA save you money because the part of your income you put in is not subject to income tax.


Spread your investments in a mix of guaranteed interest and mutual funds tied to the performance of stocks and bonds. Don't take on more risk than you are comfortable with, but understand that some stock and bond funds give you the opportunity to enhance your long-term investment return even if you experience some market downturns.

Regular Reviews

Consider speaking to a qualified professional financial adviser. Advisers can help you establish a plan and follow your progress so that if you should find yourself off course, you can quickly rectify the situation and get back on track toward a comfortable early retirement. Advisers often work only on commissions, so you won't have to spend extra money for their assistance.