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9 Tips on How to Retire Early

Dreaming of retiring in your 30s? Find out how you can save enough money to retire early and enjoy life.

By Karen Lynch | American Express Credit Intel Freelance Contributor

6 Min Read | November 06, 2019 in Money



Early retirement requires rigorous planning and budgeting.

Complex calculations include everything from lifestyle choices to healthcare uncertainties.

You may actually need to “live beneath your means” and invest the savings aggressively in order to retire early.

It’s a struggle for many to save up for retirement, period. But what if you want to retire early?

Personal finance gurus have run the numbers and charted multiple viable paths to early retirement. But most share a challenging starting point: you’re going to need a lot of money. How much depends on what age “early” means to you, what you want to do in retirement, and a host of other factors. The calculations for how much money you actually need to retire early can range from at least 10 times to as much as 25 times your annual income,1,2 so you can live off of that nest egg’s annual return on investment.

Guides on how to retire young suggest that you determine the kind of lifestyle you want, create a mock retirement budget, begin to save more, spend dramatically less, and invest wisely. You might even take a second gig to realize your dream.

Above all, you need a serious plan. Hitting the reset button might not be an option if you run into difficulties after you’re well into retirement.


What Is Early Retirement, Anyway?

Retirement is in the eyes of the beholder. In a survey from the Associated Press, nearly one in four Americans said they’ll never retire, whether they want to or not.3 At the other end of the spectrum, there’s an entire movement dedicated to retiring early (even at the age of 30 or 40), which goes by the acronym FIRE (Financial Independence, Retire Early).4 Gallup pollsters have reported that the average American expects to retire at 66, though the actual retirement age is 61, on average, and that hasn’t changed much in recent years.5 

Early retirement is a choice for some and a necessity for others, with reasons including family priorities, health issues, layoffs, career dissatisfaction, and lifestyle. Some plan to “retire” from the rat race but keep working at a different pace—to the beat of their own drum on their own passion projects.


Whatever drives you, it’s clearly better to be prepared.


How to Retire at the Age of 55 or Before? It’s Complicated

Early retirees have to embrace a certain level of uncertainty given the shifting environment for social security, health insurance, long-term care, investments, taxes, and other weighty considerations.

Beginning to break this down, AARP points out that, “living mostly on social security alone can be difficult.”6 And, the earlier you take your benefits—say, at 62 rather than at 66—the less you will get, according to the Social Security Administration.7 In any case, nearly half of Americans under 50 expect to receive no Social Security benefits at all when they retire, according to the Pew Research Center.8 

Among other considerations, early retirees will need to cover their own healthcare until eligible for Medicare at 65, though their costs and access are subject to changes now being contemplated in the health insurance market. On top of that, many see supplemental healthcare insurance as a must. Pew also reported that nearly three out of four Americans expect that they or their families will have to pay for the long-term care that older adults may need.


Adding even more uncertainty, investment portfolios are subject to volatility. Plus, property taxes, capital gains taxes, and other taxes can be the source of unpleasant surprises.

There are also common traps to avoid, such as a tendency to overspend in the first years of retirement or ignoring your credit score as you whittle down your spending.

Yes, retirement is complicated—and the earlier you retire, the more complicated it can be.


Planning for Early Retirement

All that said, the more money you have stockpiled for early retirement—and the more carefully you spend it once retired—the less these complications matter. Below, a mashup of advice from personal finance gurus provides high-level considerations on how to retire early.


Establish your budget. You should set the stage with a mock retirement budget, estimating in detail what you think you will spend on food, home repair, and other need-to-haves and want-to-haves for the lifestyle of your choice. Model budgets and first-person accounts by early retirees are readily available online.9


Eliminate debt. Then, the first step toward saving for early retirement is eliminating debt, according to NewRetirement Co-founder Kathleen Coxwell. “Debt weakens one of your most powerful wealth-building tools: your income,” she said. Coxwell recommends starting by paying off high-interest credit cards and then moving on to cut lower-interest debts.10 

Reduce spending – significantly. To retire early, you may have to reduce your spending significantly to be able to invest sufficiently. “Live beneath your means,” is one FIRE movement motto. That could mean anything from downsizing into a smaller home to moving into a less expensive community to dispensing with a whole lot of nonessentials.

Maximize compound growth. As for those investments, personal finance author Chris Hogan advises opening 401ks, IRAs, and other tax-advantaged retirement funds as soon as you start your career to maximize compound growth as well as any employer matching funds.11 (But remember: withdrawing any of it early could result in financial penalties.)

By investing $575 a month every year, beginning at age 25, you could retire fully at the age of 60 with a $2 million nest egg, Hogan says. Investing $150 a month over 30 years could yield nearly a quarter of a million dollars, says one wealth management firm. Other estimates vary, but some online retirement calculators include options for you to figure out how aggressively you would need to save and invest to reach early retirement objectives. Of course, financial advisors would also be happy to help.

Planning for contingencies can help keep your early retirement from imploding. Figure out how much to set aside to replace big-ticket items, such as cars, or to pay for uninsured medical expenses. And take care if you decide to assign part of your investment portfolio, rather than savings, to cover the unexpected—for example, what could be the capital gains tax implications?

Finally, refresh your early retirement plan periodically, because facts change and you don’t want to find yourself missing your own retirement party by a couple years.

9 Tips on How to Retire Early


The Takeaway

At some point in nearly everyone’s career, early retirement may start sounding like a good idea. The question is how to retire early. If you’re serious about it, you’ll want to consider the pros and cons—and challenges and benefits—from every angle. Detailed planning and aggressive saving and investing might just get you over the line with time to spare.

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.


All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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