How to Retire Early: 5 Steps, What to Know
If you’re considering early retirement, here’s how to strategically prepare your financial plan.

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For many, the idea of early retirement — leaving the workforce before age 62 and enjoying the freedom that comes with it — might seem aspirational. For others, life might have thrown a curveball that made retirement arrive sooner than expected.
Whether early retirement is a goal or an unforeseen challenge, taking steps now can help put you in the best financial position for any uncertainties down the road. Here's how you can strategically prepare your financial plan if you're curious about early retirement.
FAQ: What is early retirement age?
In general, early retirement refers to leaving the workforce before the Social Security Administration’s full retirement age, which is when you can get full Social Security benefits. That’s age 66 or 67, depending on your birth year. But people who pursue early retirement may have a much lower number in mind. It could be in their 50s, 40s or even earlier, depending on their individual goals.
» Want to know if you can retire early? Try our early retirement calculator to find out.
1. Estimate how much money you’ll spend
Your current cost of living provides some foundation for estimating your retirement spending. For a rough estimate of your future living expenses, look at your current monthly spending and consider what will go down, what could go up and what might be added or eliminated altogether.
Add up your final monthly expense estimates, multiply by 12 and you’ll have a rough estimate of your annual retirement needs. If adding some cushioning is important to you, consider increasing your estimate by 10% to 20% so you have some wiggle room to splurge every once in a while or take care of surprise expenses.
2. Estimate your total savings needs
Half of retirement planning is figuring out your spending — the other half is figuring out how much you need in savings. There are a couple rules of thumb used by early retirees to figure out how much they might need to stash away.
The rule of 25 operates on the idea that you should have 25 times your planned annual spending saved before you retire.
That means if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk. If you plan to spend $50,000, then you need at least $1,250,000.
The rule assumes that your retirement nest egg is invested so it continues to grow — after all, thanks to inflation, your spending will increase at least slightly each year, and your investments need to keep up with that.
» Confused about inflation? Use our inflation calculator
The 4% rule indicates you can withdraw 4% of your invested savings during your first year of retirement. Each year after, you draw that amount adjusted for inflation.
The 4% rule stems from research in the 1990s that tested a variety of withdrawal strategies against historical market conditions. You may want to take a more or less conservative approach, depending on your investments, risk tolerance and how the market is performing when you retire.
But there remains this disclaimer: Neither of these rules is foolproof. You’d be hard-pressed to find a financial advisor willing to guarantee your results. But they’re generally considered reasonable strategies, or at the very least, starting points to help you think about how much you'll need to save for retirement.
3. Make adjustments to your current budget
No matter how you want to slice it, retiring early means making some changes to how you currently earn and spend money so that you can afford more financial flexibility in the future. For many people, that means cutting their budgets to the bare minimum. Many people with early retirement ambitions aim to live on 50% of their income (or less). The rest gets funneled into savings.
Those who follow the FIRE (“financial independence, retire early”) movement adhere to certain principles to help them achieve early retirement. The strictest followers save up to 50% to 70% (or more) of their take-home pay, cutting out large and small expenses to make it happen. There are also different types of FIRE, which could help spark inspiration for how to save money on transportation, utilities, food and housing costs.
4. Invest for growth
When it comes to investments, retiring early means two things:
You have a shorter period during which you can save.
You have a longer period during which the money you’ve saved needs to support your spending.
Both of those mean investment returns are going to be your best friend. To achieve the best returns, you need to invest in a balanced portfolio geared toward long-term growth.
You may think the opposite is true: Because you have a shorter time horizon before retirement, you might want to take on less risk. But it’s important to remember that the time you spend in retirement should be included in that horizon — you might be retired for 50 or 60 years; you need your money to continue to grow during that time.
That’s why your investment strategy likely will include a mix of tax advantaged accounts as well as regular brokerage accounts.
Go deeper:
5. Supercharge your savings
Accumulating enough savings to retire early can seem daunting. You may feel underwhelmed by your current ability to save for early retirement. It's also wise to find ways to bring in some extra income that can go directly into your early retirement coffers.
Go deeper: Explore new ways to make money.
Early retirement calculator
Think you're ready to retire? Use this tool to find out.
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