How Much Money Do You Need to Retire at 50?

By: Dave Roos & Jeff Harder  | 
black couple walking in the woods
It would be great to get started on your retirement before 67 and enjoy the best of life. Jupiterimages/Getty Images

If you want to say goodbye to the working world by the time you turn 50, you need money — a lot of money. The core challenge is the same as any other early retirement: You have fewer working years to build your nest egg and more time to spend it. While you don't need to be an oil baron or a millionaire's offspring to retire at 50, here's what you do need: an extra-disciplined approach to saving and spending, a clear view of the obstacles you'll face, a lot of planning and a little faith.

First, let's do a little back-of-the-napkin math to figure out how much money you'll need. According to the Centers for Disease Control and Prevention, a resident of the United States can expect to live to about 79.9 years old. Many financial advisers recommend budgeting to spend between 55 and 80 percent of your annual pre-retirement income to keep your standard of living [source: Fidelity]. If you live off $60,000 a year while you're working, that means you'll need between $33,000 and $48,000 a year during retirement. So, if you live until age 80, you'll need to have assets valued between $990,000 and $1.44 million. You can use a retirement calculator, like this one offered by Vanguard, to figure out how whether you're on track to retire comfortably at 50 depending on how much you're making and saving currently.


But finding the true number is much more complicated. Inflation has a huge impact on your retirement budget: According to the Bureau of Labor Statistics, a person who lived on $60,000 in 2001 would need around $92,000 to have the same buying power just 20 years later. There are also health care expenses, which have risen significantly faster than inflation in the past decade [source: Patton]. You'll most likely need to purchase private insurance to cover your health until you're eligible for Medicare, and don't expect to stop paying when you reach 65: A healthy 65-year-old married couple without chronic conditions retiring in 2019 can expect to pay $387,000 out-of-pocket during their retirement. A healthy 50-year-old couple retiring in 2019 could expect to spend $405,000 [source: Annuity].

The amount you need to retire also depends on your individual circumstances and retirement goals. Do you have children? Do you have debt? Are you planning to enjoy the luxurious fruits of your labor, or will you retire in austerity? The magic amount you'll need to retire can vary widely depending on your answers to these questions, and you'll probably want to speak with a financial adviser to get a better guess.

Let's look at how to go about saving and investing for retirement at age 50.


Saving and Investing to Retire at 50

couple with financial planner
You may want to use a financial planner to make sure you're on track with your early retirement goals. JohnnyGreig/Getty Images

Even if you're retiring at 50, the conventional wisdom of saving and investing still applies.

  • Start saving early. The power of compounding interest means that a small deposit made today is almost certainly more valuable than a larger deposit made in 10 years. Compounding interest also helps alleviate the effects of inflation on the value of your savings.
  • Invest in tax-deferred retirement accounts like 401(k)s and Individual Retirement Accounts (IRAs). Make sure your investment portfolio is diversified — that is, composed of a mix of stocks, bonds and other assets to offset their associated risks. Strike a balance between riskier high-return investments and safer, low-return investments. You also might consider an inflation-adjusted annuity, which pays out a designated sum annually for a set number of years.
  • While you can save money up front by managing your own investments, hiring a financial adviser can pay off. ''People tend to do a very poor job of investing on their own. They tend to get emotional and get in at the peak of the market and sell at the bottom," says Robert Michaud, who was managing director of research and development at the investment advisory firm New Frontier Advisers when we spoke to him in 2011. (Michaud is now the company's chief investment officer.) ''Adviser fees might be something like 1 percent of the value of your portfolio, but for a lot of people that's a good deal.''
  • During your first decade of retirement, you'll want to avoid tapping into your retirement accounts. With a few exceptions, any withdrawals from your 401(k) or IRA will incur a 10 percent penalty. That's on top of taxes on the income and the reduction of value of the accounts, which will generate less interest over time. Instead, rely on cashing out stocks, tapping into a bank savings account, or other sources of income like a rental property. You might even consider delaying a full retirement and working part-time at first.

So, how much money should you take out to finance your early retirement?


Spending During Your Retirement

So, you've squared away your investments, and you're counting down the days until your 50th birthday. How much money should you withdraw each year during your retirement? For a traditional retirement, many investors recommend withdrawing 4 percent of your nest egg's initial value each year, adjusted for inflation. If you start off by withdrawing 4 percent of your savings — that's $47,200 if you have a $1.18 million nest egg — there's an 80 percent chance of your savings lasting for 30 years, but if you take a 6 percent draw — that would be $70,800 — the odds drop to 25 percent [source: Updegrave].

We talked about living off 55 to 80 percent of your pre-retirement income, but that amount can vary depending on what you intend to do during your retirement. Maybe you want to withdraw more money at first to travel the world and scale down as you get older. Maybe the peace of mind of knowing you have funds for a medical emergency further down is incentive enough for you to keep your withdrawals low. Simply put, it's a matter of balancing your enjoyment of retirement with your ability to pay for it.


It helps to be thrifty. Spending less before you retire means you have a bigger chunk of money to grow, and spending less after you retire means you can stretch your savings further. Track your expenses with a personal finance software program like Quicken — or go the route of John D. Rockefeller and just write all of your purchases down in a book [source: Parr] — and trim costs wherever you can. Eat out less often and buy generic instead of name brands; pay off your debt, buy a less expensive vehicle, take fewer and less lavish vacations, or find a smaller home in a less expensive city.

You might decide to make bigger decisions to meet your retirement goals, like foregoing having children — the U.S. Department of Agriculture estimates it costs $284,570 (with inflation) to raise a child in a two-parent, middle income family, not including college [source: Lino]. After you retire, you might consider moving to a country with a favorable exchange rate or low cost of living to stretch your funds even further [source: Emling].


Retire at 50 FAQ

How much money do I need to retire at 50?
Many financial advisors recommend budgeting to spend at least 70 to 80 percent of your annual pre-retirement income to keep your standard of living. So if you retire at 50, you're going to have to have a lot more saved or invested than someone who retires later in life.
How much money do you need to save to retire at 50?
Having seven times your annual salary saved should set you up to retire comfortably at 50.
Can I retire at 50 years old?
It's possible if you have a high-paying job, and are prepared to invest well and live modestly. You may to take part-time jobs or find another stream of income if your savings get too low during retirement.
How much money should I have in my 401k when I retire?
You should have 10 times your annual salary saved if you retire at 67.

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