4 Purchases Keeping the Middle Class from Retiring Early
Written by
Vance Cariaga
Edited by
Zuri Anderson
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For most people, the dream of retiring early never makes it past the dream stage. On average, Americans target a retirement age of 62 but anticipate they might work until about age 70, according to a recent survey from Empower.
Retiring early on a middle class income is especially challenging — and all but impossible for those who don’t carefully monitor their spending.
Data from the Pew Research Center found that middle income households had annual earnings ranging from about $56,600 to $169,800 as of 2022, depending on where you live.
Meanwhile, a SmartAsset analysis found that if you want to retire by age 55, you need to have at least seven times your annual income saved up. So if your earn $70,000 a year, you will need to save up $490,000 or more by age 55.
Doing that will take a combination of aggressive retirement savings and frugal living. Unfortunately, some middle income earners have a hard time with the “frugal living” part.
Here are four purchases that often keep middle class Americans from retiring early.
Costly Home
The easiest way to ruin your early retirement plans is to buy more house than you need.
As a general rule, your total home value should be no more than three to five times your total annual household income, according to Fidelity. If you earn $70,000 a year, for example, then you shouldn’t spend no more than $350,000 on a home.
That’s tough in a housing market where the median home sales is more than $420,000, according to the latest Federal Reserve data. Even so, you should resist the urge to buy an expensive home if you want to retire early on a middle class income.
A big down payment means less cash for your retirement fund. In addition, you’ll be hit with a higher monthly mortgage payment along with higher property taxes, maintenance costs and heating/cooling bills than you would with a smaller, cheaper home.
Brand New Cars
The average price of a new car was $49,345 as of December 2024, according to CoPilot. That compares to an average of $32,065 for a used car — a difference of more than $17,000.
If you buy a new car every five years, then you could be spending an additional $70,000 over the course of two decades versus buying a used car. That kind of cost difference can greatly hinder your plans to retire early on a middle-class salary.
Excessive Subscriptions
A blog on the New Trader U website refers to subscription overload as the “silent budget killer.” Subscription costs might seem low when you look at them individually, but they add up quickly when you’re juggling a bunch of them.
You might be paying $100 a month or more on streaming service subscriptions, gym memberships and similar purchases. That’s $1,200 a year — money that could be put into a retirement account, where it would grow much bigger thanks to compounding, interest and investment gains.
Private Schools
Nearly all financial advisors warn against pouring so much money into your kids’ education that it hurts your own retirement plans.
But many parents still do it. In some cases, middle class parents send their kids to private elementary/secondary schools and high schools. As of 2021, these schools carried average yearly tuitions of $12,790 and $15,344, respectively, according to the Education Data Initiative.
You could end up spending more than $200,000 on private school tuition before your child even goes to college. Once they reach college, you might spend an additional $200,000 over four years if they attend a private university.
You’ll have a much easier time retiring early on a middle class income if you find good public schools and in-state public universities.
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