How can I retire early, and how much do I need?

How can I retire early? You need invested savings that pay your expenses for every year of retirement, minus what Social Security pays. The amount depends on 5 assumptions: your expenses, the age you retire, the age your money has to last to, your Social Security benefit and what your savings earn.

The assumptions in the example

• Your expenses for one year: add up what you spend in a month, then multiply by 12. Example: $3,500 a month × 12 = $42,000 a year.
• The age you retire: for example, 45.
• How long your money has to last: in the US, a 45-year-old lives another 36.5 years on average, to age 81 and a half ^[9].
• A safety margin, because that figure is an average: out of 100 people aged 45, 46 are still alive at 85 and 27 at 90 ^[9]. So the example plans your money to age 90, which means 45 years of retirement.
• Your Social Security benefit: you can claim Social Security at age 62 at the earliest ^[4]. Example benefit: $1,500 a month, or $18,000 a year.
• Returns: to keep things simple, the example doesn't count what your savings earn, which lowers the amount you need. The example doesn't count rising prices either, which push up your expenses in dollars.

The math, step by step

1. From 45 to 62, your savings pay for everything: 62 − 45 = 17 years, and 17 × $42,000 = $714,000.
2. From 62 to 90, your savings pay what Social Security doesn't cover: $42,000 − $18,000 = $24,000 a year, for 90 − 62 = 28 years, so 28 × $24,000 = $672,000.
3. In total, you need $714,000 + $672,000 = $1,386,000 at 45, or about $1,400,000.

Enter your age, your income, your expenses and the age you want to retire in the tool. The tool assumes a 5% annual return by default, and shows what your savings will pay you each month if you withdraw 4% a year. That 4% pace was only tested on retirements of 15 to 30 years ^[1]: for a longer retirement, compare your savings to the amount calculated above instead.

• What counts is your spending, not your income: in the example, spending $500 less a month, or $6,000 a year, takes $270,000 off your goal ($6,000 × 45 years of retirement).
• What about the “25 times your expenses” rule? This benchmark comes from a study published in 1998 in the AAII Journal, the journal of the American Association of Individual Investors (AAII), an association of US investors ^[1].
• What the study says: over retirements of 15 to 30 years, withdrawing the same amount each year, equal to 3% or 4% of the starting balance, very rarely emptied a portfolio of stocks and bonds ^[1]. Withdrawing 4% a year means having 25 times what you withdraw, because 100 ÷ 4 = 25.

The bigger the share of your paycheck you save, the sooner you can retire. Your savings rate works twice: you put more aside, and you need less to live on.

Example: you earn $5,000 a month after taxes, and you spend everything you don't save. You save from 30 to 55, starting from $0, and your savings earn 5% a year. This is a simulation, not a promise, calculated the same way as in the tool.

The table compares your savings at 55 to the amount you need to retire at that age, with the expenses in each row. That amount is calculated as in section 1: money lasting to age 90, an example benefit of $18,000 a year from age 62. After you retire, the math counts neither returns nor rising prices.

• Going from 10% to 30% savings shrinks the gap from about $1,100,000 to about $107,000 in this example.
• At 40% savings, your savings beat the amount you need at 55 by about $389,000.
• Every raise is an opportunity: if you save the raise instead of spending it, your savings rate goes up without changing how you live.
• Money you've already invested shortens the road: the table starts from $0.

For early retirement, fill your retirement accounts first, then a regular brokerage account for the years before 59 and a half. Each account has its own limits and withdrawal rules.

• 401(k): the retirement savings plan your employer offers. In 2026, you can contribute up to $24,500 a year, or about $2,040 a month ^[2].
• IRA (Individual Retirement Account): a retirement account you open yourself with a broker. 2026 limit: $7,500 a year ^[2].
• From age 50, you can put more into your 401(k): up to $32,500 a year in 2026, and up to $35,750 from ages 60 to 63 ($24,500 + $11,250) ^[2].
• Regular brokerage account (an investment account with no retirement rules): your money stays available at any age. This account pays your expenses between the day you retire and age 59 and a half.

Two IRS (Internal Revenue Service, the US tax agency) rules let you withdraw before 59 and a half without the 10% tax ^[3].

• The rule of 55: if you leave your employer in the year you turn 55 or later, you can withdraw from that employer's 401(k) without the 10% tax ^[3]. Example: you leave at 56 and withdraw $40,000: you avoid $4,000 in tax.
• The rule of 55 doesn't work for an IRA ^[3]: keep the money you want to withdraw early in your 401(k).
• Substantially equal periodic payments: you withdraw a sum each year calculated under fixed rules, without the 10% tax ^[3]. This exception applies to both the 401(k) and the IRA.

If you retire early, your savings pay for everything for years, because Social Security and Medicare come later.

• Social Security (the US public retirement program): you can claim it at 62 at the earliest ^[4].
• The longer you wait, the higher your benefit ^[4]. If you were born in 1960 or later, your full retirement age is 67 ^[6]. Claimed at 62, or 60 months early, your benefit drops by 30% ^[7]: 36 months × 5/9% = 20%, then 24 months × 5/12% = 10%.
• Medicare (public health insurance for older Americans): it usually starts at 65 ^[5]. Example: if you retire at 55, you pay for 10 years of health insurance yourself.
• Add these costs to your expenses before you calculate your goal. Example: $300 more a month for those 10 years is $36,000 more to save (300 × 12 × 10).
• Estimate your benefit on the Social Security website. The tool has no field for the age your benefit starts: it adds it from the age you retire. If you retire before 62, leave $0 in the tool, as in its example at 55, and count your benefit with the math from section 1.

The big upside of early retirement is time: free years while you're still in good shape. In exchange, you have to save more and accept more risk.

• Pro, your time: retiring at 50 instead of 65 means 15 more free years.
• Pro, choice: with your savings, working becomes an option. Example: a part-time job at $1,000 a month for 10 years is $120,000 your savings don't have to pay (1,000 × 12 × 10).
• Con, a bigger nest egg: your savings have to last longer, and your contributions stop sooner.
• Con, a smaller benefit: your Social Security is calculated on your 35 highest years of earnings (indexed), and if you have fewer, the years without earnings count as $0 ^[8]. So fewer working years can mean a lower benefit.
• Con, market risk: a big drop right after you retire drains your savings faster, because you're withdrawing money at the same time.

An early retirement plan fits in 5 steps, from your budget to your withdrawals.