A Checklist for Retiring Early

couple posing for a selfie in front of a lake in the mountains

Retiring early is a great idea — if you can afford it.

Unfortunately, few people plan for retirement as well as they should, regardless of when they want to retire.  A common rule of thumb is to save 10 times your final salary to retire by age 67.  For someone with an annual salary of $50,000, that would equal having $500,000 saved in retirement funds.

Americans are getting nowhere near saving that much money for retirement.  The median retirement savings for all working age families between ages 32 and 61 is $5,000, according to a 2016 report by the Economic Policy Institute.1

That savings has to last them a long time.  The average length of retirement is 18 years, according to the U.S. Census Bureau.2  That time expands if you retire early or live longer than the average life expectancy (age 84.3 for men and 86.6 for women).3

Beyond saving more money for retirement, which is a good place to start, here’s a checklist for retiring early:

When to Start Federal Benefits

The Social Security Administration has rules for when Social Security benefits can be collected.  The longer you put off collecting them, the more money you can get.  To receive the full amount of benefits, you must reach full retirement age.  Check out the agency’s retirement planner to determine your full retirement age.4

If your full retirement age is 67 and you choose to collect Social Security benefits at age 67, you’ll get 100% of your benefit amount.  Keep in mind that if you continue to wait past age 67, you could get over 100%.

In contrast, if you start retirement early, you may receive a portion rather than the full amount.  For example, if you start your retirement benefits at age 62 — the earliest age to receive them — your benefit is reduced by about 30%.  At age 63 it drops about 25%.

Back to the other end of the scale, delaying those benefits until after full retirement age can allow you to be eligible for delayed retirement credits that would increase your monthly benefit.

Medicare benefits begin at age 65.  Retiring before then will most often require having private health insurance until you’re eligible to go on Medicare.

When to Start Retirement Benefits

Retirement plans also have restrictions on when they can be used.  Money can be withdrawn from a 401(k) retirement plan without paying a 10% penalty at age 59½.

However, there’s a provision for taking out 401(k) funds without a penalty at age 55 if you retire early.  Your employment must have ended.

How much income will you need?

Determining how much income you’ll need in retirement isn’t easy since there are many expenses to consider.

One rule of thumb is that 70-90% of your annual pre-retirement income is needed.  This can come from retirement accounts, Social Security, pensions and other savings you might have.  You may also have IRAs, investment accounts, rental property and dividend-paying stocks to rely on.  In addition, you could supplement income with part-time work.

Withdrawing 3-4% from your retirement account is a good starting point.

List Your Expenses

Your expenses in retirement will likely differ from those in your pre-retirement years.  For example, without a daily commute, you’ll probably spend less on gas and other transportation expenses.  You may also move somewhere that’s cheaper to live, or no longer have a mortgage payment.

That said, other expenses may increase:

  • Health care
  • Travel
  • Home remodel
  • Or maybe even bikes, a new car or other retirement toys

As with any stage in life, planning for emergency expenses should also be part of the financial equation:

  • Do you have enough health insurance or money set aside to pay for emergency medical care or if you have to move into a long-term care home?
  • Can you afford a major car repair?

Easing into Retirement

One way to see if you’re able to afford retiring early is easing into part-time work.  You can start by decreasing work to four days a week, then more as your expenses drop and you continue to find it affordable.

Or start by working part-time for your employer and turn a hobby or other skill you’re passionate about into a side job.

At the very least, try to put off receiving Social Security and other benefits, such as pulling money out of a retirement account, until age 65 or 67 in order to make the most of that resource and to avoid certain penalties.

Another option is to challenge yourself right now: try living on 70% of your salary for six months or so, and see how it affects your lifestyle.  It might be easier than you think and allow you to retire early without worrying about how much money you have coming in.

Whether you want to try the challenge, save more, or make sure you have a solid retirement plan and timeline, your Money Coach can help.  Work with a coach who is a Retirement Specialist.  Together, you can review your current financial habits and develop a plan for success now and in the future.  The first step is easy — call 888-724-2326 today.


1“The State of American Retirement.”  Economic Policy Institute, 3 March 2016, http://www.epi.org/publication/retirement-in-america/#charts.  Accessed 7 Sept. 2017.

2“Aging in the United States.”  U.S. Department of Commerce, n.d., https://www.census.gov/population/international/files/97agewc.pdf.  Accessed 7 Sept. 2017.

3“Calculators: Life Expectancy.”  Social Security Administration, n.d., https://www.ssa.gov/planners/lifeexpectancy.html.  Accessed 7 Sept. 2017.

4“Retirement Planner: Full Retirement Age.”  Social Security Administration, n.d., https://www.ssa.gov/planners/retire/retirechart.html.  Accessed 7 Sept. 2017.