Ready To Retire at 50? Here’s How To Know if You Can Do It

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Retiring at 50 used to be just a fantasy for all but the wealthiest Americans. These days, though, the push to retire early and enjoy life while still relatively young has been gaining momentum.

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Inspired by the “Financial Independence, Retire Early” movement — typically referred to as “FIRE” — more younger workers are striving to reach this lofty goal. But is retiring at 50 really possible, or is it merely the false hope of the social media generation? Here are some concrete, real-world benchmarks you can use to see if you can really do it.

You Have a Sufficient Retirement Fund

A large retirement fund is the most obvious and important benchmark for determining whether or not you can retire early. Of course, it can be hard to calculate exactly what “enough” means.

For starters, no one knows exactly how long their retirement will last. If you retire at age 50, the New York State Department of Health says that your life expectancy is about 78 if you’re a man, or 82 if you’re a woman. However, it’s entirely possible you may live until 90 or beyond, meaning your retirement could last 40 years or more. That’s a long time for money to last, so you’ll want to make sure you clear these expectations with room to spare.

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One way to estimate how much you’ll need is to multiply your current annual expenses by 25. For example, if you currently spend $50,000 per year, by this calculation, you’ll need $1.25 million in your retirement fund. But if you plan to retire early, you’ll likely need to bump up this estimate. Spending $50,000 per year for 40 years, for example, would require at least $2 million in savings.

Since retiring at a younger age increases the variability of your projections, you’ll likely want to speak with a financial advisor about your plan. One of the reasons that retiring at age 50 makes financial planning more difficult is that you won’t be able to draw from Social Security for at least another 12 years. Access to your retirement funds may also be limited at this early age. This is why a significant portion of your savings must be in readily accessible accounts, rather than locked away in retirement plans.

You Have a Sufficient Emergency Fund

If you’re going to be retired for 30 years or more, it’s highly likely that you will encounter some emergency expenses along the way. If you don’t have a sizable emergency fund in place, you may find yourself drawing from your retirement savings or putting those costs on a credit card.

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Retire Comfortably

Either choice is bad when it comes to your overall financial planning and will likely delay your projected retirement date. For current workers, experts suggest having three to six months’ worth of expenses in an emergency fund, but if you’re planning on retiring early, you might be better off doubling that amount.

You’ve Created a Workable Retirement Budget

Your retirement budget is likely to look very different from the one you have as a worker. Although every person is different, many retirees find that their transportation and clothing expenses decline but their travel and healthcare costs increase. Whatever the case is for you personally, you’ll have to create a workable budget that includes realistic numbers.

Next, compare this budget with your retirement savings. If your retirement income won’t be sufficient to cover your budget, then you’re not yet ready to retire.

You Have Coverage for Healthcare Needs

Good medical insurance is a cornerstone of a solid early retirement plan. If you’re retiring, you’ll likely lose any health insurance you receive from your employer. You’ll also be 15 long years away from Medicare coverage if you retire at age 50.

At the same time, your healthcare expenses are likely to increase as you age. If you don’t have sufficient insurance to pay for the bulk of these costs, you’ll have to siphon off your retirement savings, and this could prove financially disastrous. The bottom line is that if you don’t have adequate coverage for your healthcare needs, you aren’t in a position to retire at age 50.

Retire Comfortably

You Have a Plan To Keep Busy and Mentally Sharp

When you’re working, you likely have a daily routine that involves both critical thinking and social interaction. When you retire, however, much of that daily stimulus vanishes overnight. This is particularly true if you’re single when you retire.

Retiring early can have the same effect, as many of your colleagues or social contacts may remain in the workforce and not have as much availability as you do. As a result, you may end up facing boredom or even mental decline. Before you retire, you’ll want to develop a plan to keep busy and mentally sharp. This can mean different things for different people, from joining social clubs or traveling to volunteering or performing community service.

The long and short of it is you’ll need to fill the void created when you leave the daily routine of your job behind. Without such a plan, you may not really be in a position to retire.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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