How To Retire At 50

Everyone retires at a different age, but on average, Americans tend to retire around 63. However, this age might seem too late for some people. Many dream of retiring at 50, but is this possible?

How To Retire at 50

Some people’s main financial goal is retiring early. They aim to work as hard as they can, sacrificing some lifestyle elements so they can live their later years the way they want to. 

With work, retiring ten or more years earlier than average is possible, but you will have to live beneath your means to save the necessary funds in your thirties and forties (Find out the Average Retirement Savings here).

This also means that you’ll also have to make good financial decisions, invest wisely, and make the most of any good fortune that comes your way. 

If you are aiming to retire at 50, there are some factors you need to consider to make this goal possible.

We’ll cover these in this article, including important features like expected lifespan, retirement accounts, and family history. 

What Retirement Lifestyle Do You Want?

One person’s retirement predictions will be different from the next. This is why there’s no single figure that will suit everyone’s retirement needs.

A good rule to follow is to own anywhere from 60% to 100% of your working income to cover each year spent in retirement (You might want to check out how retirement ratios work here).

This is a big spectrum, and where you lie in it will vary depending on the retirement life you want. 

For instance, if you want to spend your golden years traveling around the globe, you’ll need closer to 100% of your prior income.

On the other hand, if you’d prefer to spend retirement relaxing and enjoying a home-bound lifestyle, you might need a figure nearer 60%. 

To have a rough prediction of the amount you’d need, begin by estimating what your expected salary would be when you are 50.

Once you have a picture of the retirement lifestyle you’d want, multiply the salary figure by a value between 0.6 (60%) and 1 (100%).

This will give you a rough idea of what you’ll need to cover each retirement year. 

Predicted Lifespan

In the United States, people live for an average of 78.6 years. It’s important to factor in your expected lifespan to figure out how many years your funds need to last.

If we use the average lifespan as an example, retiring at 50 means that your money will need to last for at least 29 years.

To work out the total retirement funds you will need, multiply the yearly retirement allowance you worked out above by 29. 

Take note, that even though the average lifespan might be around 78, your life expectancy might be more or less depending on your health.

Talk to a medical professional to gain a better picture of your individual life expectancy. 

Investment Plans

One of the main difficulties of retiring at 50 is that you’ll have fewer years than others to save and collect assets. The way you make up for these lost years will vary from one person to the next.

How To Retire at 50

If you worked at a job with a higher salary, you may be able to invest lightly and obtain enough capital to retire early.

If you don’t earn a huge amount of money, you may look for greater returns and invest daringly to help you earn enough.

However, keep in mind that aggressive investment portfolios mostly contain unstable stocks. 

Investment success relies on a strong plan and depending on your investment strategy, a little luck. You can either handle your own financial portfolio or seek advice from a financial expert.

These professionals will either have fees or ask for a commission of your earnings.

However, if your retiring early plan relies a lot on your investment plan, this might be a good use of your money. 

Using Retirement Accounts 

Tax-deferred retirement accounts, like IRAs and 401(k)s have yearly contribution limits. If you’re under 50, the limit for IRAs is $6,000, while 401(k)s are $19,500.

If you max all of your retirement accounts, you’ll own a greater amount of tax-advantaged retirement funds which can accumulate in the future. 

Despite this, $19,500 is a large amount of money, so finding these funds in the first place can involve more than living below your means.

This is particularly significant for those in their twenties who are still working up the career ladder. 

If you are in your twenties, practice living as far beneath your means as possible.

Avoid luxury holidays, keep driving your old car until it’s at the end of its lifespan, and use anything saved in preparation for the future.

It’s earlier to max out your retirement accounts earlier than later. 

Medical Histories

Healthcare is one of the largest expenses you will incur during retirement.

If your family has a medical history filled with chronic illnesses, this may affect the amount of money you’ll need later on.

Remember that long-term care insurance can soften the blow of health care and nursing home costs. 

Retirement Earning Plans

You may have stopped working, but that doesn’t mean your earnings have to stop too! Once you get nearer to 50, create a retirement income plan to make your money last.

A popular plan is to use bond ladders, certificates of deposit, and Roth IRAs (Find out The Pros and Cons Of A Roth IRA here). Other people choose to work part-time so that they still have a supply of money.

When these plans are used correctly, they ease your worries by keeping a steady cash flow coming in. 

The Bottom Line

Retiring at 50 is possible, but it is difficult to achieve. The goal is to save more money in fewer years than others, which is hard to do.

You’ll need to be prepared to make financial and lifestyle sacrifices in the few decades before turning 50, then use these funds to build wealth afterward.

You can work with a financial expert to create a plan when you’re younger, so you can enjoy the rewards once you reach 50.

Remember that investments aren’t without risk, so do your research and only invest what you can afford to lose. 

Andre Flowers
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