Coryanne Hicks


Everything you need to know to retire at 50 starts here.

Can I retire at 50?

So you want to retire at 50. Who wouldn’t? If the financial independence, retire early (FIRE) movement is any indication, early retirement is consuming a larger and larger portion of the American psyche. FIRE retirement practitioners aren’t waiting until 65 to retire. Instead, they’re retiring early by achieving financial independence (when your money makes enough money that you no longer need to work) decades before conventional wisdom says they should be able to retire. Here are the 11 steps to financial independence so you can retire at 50.

Start with how much you’ll spend.

FIRE retirees use a goals-based approach to saving. Rather than starting with a certain age (such as 65), they begin with how much money they need to retire. To determine what you need to retire at 50, calculate what you’ll spend in retirement. A good starting point can be your current spending. Take what you spend today and subtract the costs of working, such as transportation and lunches out, says Billy Kaderli, who was vice president of investments and branch manager at Dean Witter Reynolds before retiring at age 38. Try to be as detailed and exact as you can. As you’re about to see, your future depends on it.

Plan for the cost of health care.

As you’re building your early retirement budget, add a line item for health care. Retiring at 50 means you’ll have 15 years before you’re eligible for Medicare. While some employers offer coverage for retirees, it’s increasingly uncommon, says Erin Brand, wealth strategist at PNC Wealth Management. And even if your employer provides retiree health insurance, chances are it’ll be significantly more expensive than the rate you pay while you’re still working. You may also want to have a solution in place for extended care coverage, such as home nursing care or staying in a skilled nursing facility, Brand says. Extended care is one of those unexpected expenses that can bankrupt unprepared retirees.

Calculate how much you need.

The second input in calculating how much you need to retire at 50 is your target withdrawal rate. As a rule of thumb, retirees can typically withdraw 4% (adjusted for inflation) every year for 30 years without depleting their portfolio. Given the increase in life expectancy these days, someone retiring at age 50 may need to plan for a bit more than 30 years. To compensate for this, many FIRE early retirees use a 2% or 3% withdrawal rate. Take your anticipated annual expenses in retirement and divide it by your target withdrawal rate. For example, $50,000 annual expenses at a 2% withdrawal rate might mean you need $2.5 million to retire at 50.

Save like your retirement depends on it.

Once you know how much you need to save to retire early, it’s time to get serious about your savings rate. Maximize your contributions to any retirement plans you have access to, including workplace plans, individual retirement accounts and health savings accounts. If you aren’t already at the max, sign up for auto increases, Brand says. While the conventional 10% to 15% savings rate is a good guideline for a traditional retirement, “someone with the ambitious goal of retiring at 50 needs to look higher,” she says. Depending on how much you have saved already, this could mean saving upwards of 50% of your salary.

Keep your expenses low.

The only way to save more money is to spend less. “Pay attention to your lifestyle and do what you can to live well below your means,” Brand says. You may need to “make some hard choices that’ll allow you to save today so you can live a more comfortable lifestyle in retirement.” Instead of that premium cable package, pick one streaming service or rely on the library (or friends’ log-ins) for free entertainment. One area to keep a particularly sharp eye on is your cell phone bill, Brand says, which she sees taking up an increasingly large part of her clients’ budgets.Be smart about taxes.

Speaking of costs, taxes are the early retirees’ nemesis. The more you can shelter your savings from taxes, the more they’ll be able to grow. In addition to taking advantage of any retirement savings, Brand suggests itemizing deductions, if it makes sense for you. You can also minimize taxes by being strategic about how you tap your investments in retirement. For instance, Kaderli opted to use capital gains from the sale of investments for income rather than dividends because capital gains are taxed at a more favorable rate.

Increase your income.

Cutting costs is an important element of retiring early, but it can only get you so far to your retirement savings goal. Ultimately, the amount you can save is capped by how much you earn. Early retirees know the importance of increasing your income if you want to retire by 50. “Having a small hobby or business on the side can be helpful in providing extra income, both before and after retirement,” says Darrow Kirkpatrick, who retired from engineering at 50 and has since founded the “Can I Retire Yet?” blog. It can also provide a much-needed retirement project.

Invest for growth.

Investing is essential to financial independence. Your savings need to be invested to generate the returns necessary to replace your paycheck. Kaderli calls this “creating the money machine,” where your portfolio grows faster than the rate of inflation and your spending.” Kirkpatrick points to three investment paths FIRE strategists use: low-cost index funds (the simplest path), dividend investing and rental real estate (the quickest path, if done right). Early retirees need investments in three categories. Brand says cash or cash equivalents, income-producing investments like bonds and investments for long-term growth like stock. With time on your side, she encourages early retirees to “be quite invested in growth-focused investments.”

Plan how you’ll spend your time in retirement.

When asked what they would do differently if they had one retirement do-over, many recent retirees wish they’d better planned how they’d spend their time in retirement, Brand says. Many people derive their identity and sense of purpose from their jobs. Without that, they run the risk of slipping into aimlessness and depression. Akaisha Kaderli, who retired with her husband, Billy Kaderli, at age 38 in 1991, suggests creating a list of the things you want to do, learn or see in retirement. You may not accomplish all of them, but having a list to fall back on can be an emotional savior. It can also help you project your retirement expenses.

Stay informed of legal changes.

One of the biggest challenges of planning for the future is the fact that what is today may not be the same tomorrow. The SECURE Act, which went into effect in January 2020, is a prime example. Under the act, retirees are able to delay minimum required distributions until age 72 and can contribute to individual retirement accounts, known as IRAs, at any age provided they have earned income. Both of these are positive changes for early retirees. Less positive is the fact that the act eliminates the stretch IRA, which allowed nonspousal beneficiaries to withdraw from an inherited IRA gradually over their own lifetime. Now nonspousal beneficiaries are required to liquidate inherited IRAs or 401(k)s in 10 years. This could have dire tax consequences as beneficiaries are taxed on distributions at their income tax rate and could be pushed into higher tax brackets by the inherited assets.

Choose your retirement year wisely.

The last step to retire early is choosing the year you retire with care. “One of the biggest risks any retiree faces is retiring into the beginning of a bear market,” Brand says. If you retire in a year your investments have lost value, you may need to take out more than your target withdrawal rate. “If that happens, it can have a negative near-term impact on your portfolio that can be hard to recover from,” she says. Kirkpatrick had to postpone his retirement when the bottom fell out in 2008. “I didn’t panic, kept investing and retired three years later,” he says.

How to retire at 50:

  • Start with how much you’ll spend in retirement.
  • Plan for the cost of health care.
  • Calculate how much you need to retire based on your projected annual expenses and target withdrawal rate.
  • Save like your retirement depends on it.
  • Be smart about taxes.
  • Increase your income.
  • Invest for growth.
  • Plan how you’ll spend your time in retirement.
  • Write your early retirement plan down.
  • Choose the year you retire wisely.
  • Stay abreast of legal changes.

Author: Coryanne Hicks

Source: Money. US News: 11 Steps to Retire By Age 50

Achieve financial independence and retire early with these F.I.R.E. strategies.

BEFORE THE FIRE (“financial independence, retire early”) movement invaded the U.S., before there were iPhones, before there was even the internet (gasp!), Billy and Akaisha Kaderli retired at the ripe ages of 38. Now entering their 30th year of retirement, the Kaderlis have more money than ever.

“For us, it was a bit of a leap of faith because we didn’t have anybody to mentor us or to follow,” says Billy Kaderli, who was the vice president of investments and a branch manager at Dean Witter Reynolds before retiring in 1991. “Today there’s so many more apps and online calculators to help you with your finances that it’s gotten much easier to retire early.” Their blog,, includes links to over 100 financial tools and calculators on its “preferred links” page.

How to Retire by 30 in 5 Steps

While early retirement may be easier today than in the 90s, it’s still not “easy.” To retire by 40, you need to be prepared to make sacrifices today that will allow you to provide for your future. And even then, that future likely won’t be shrouded in luxury.

FIRE early retirement isn’t about accumulating mass wealth. It’s about “buying back your time,” Akaisha Kaderli says. If you want your time back, here are tips on how to retire by 40, according to people who have made it happen.

How to retire by 40:

  • Choose if you’ll LeanFIRE or FatFIRE
  • Calculate how much you need to save to retire
  • Save 50 percent or more of your salary
  • Avoid lifestyle creep
  • Invest aggressively and economically
  • Have a contingency plan
  • LeanFIRE Versus FatFIRE

The first step to retiring by 40 is choosing your FIRE style. There are two forms of FIRE early retirement: LeanFIRE focuses on keeping retirement expenses low (according to the LeanFIRE Reddit community that’s under $40,000 per year) so you can retire with less in savings.

FatFIRE, on the other hand, is for early retirees who want a more cush retirement lifestyle (think an annual expense budget of $150,000 and up), and are willing to save up to provide for it.

“LeanFIRE types would benefit more from setting up side hustle income streams before retirement,” says LeanFIRE-ee Steve Adcock, who retired at 35 and started Think Save Retire and now writes about personal finance and lifestyle on Steve

But while the larger financial cushion of FatFIRE means you’re less likely to need supplemental income in retirement, you may have a higher hill to climb pre-retirement to build up your savings.

How Much Do I Need to Retire by 40?

Two factors go into how much you need to retire early: your anticipated annual retirement expenses and the percentage of your portfolio those expenses make up.

According to the Trinity Study, retirees can withdraw up to 4 percent (adjusted for inflation) each year in retirement without depleting their portfolio over a 30-year period. If you’re planning to retire by 40, however, you may be looking at a lot more than 30 years of retirement.

To compensate for a longer retirement, some early retirees target a 3 percent withdrawal rate. Erin Brand, wealth strategist at PNC Wealth Management, suggests going even more conservative with a 2 percent annual withdrawal rate.

The Kaderlis withdraw 1 to 2 percent on average each year and have successfully grown their portfolio throughout retirement.

To calculate how much you need to retire, take your anticipated annual expenses and divide it by your target withdrawal rate. For example, if you plan to spend $50,000 per year in retirement and want to withdraw 2 percent, you’d need $50,000 divided by 0.02, or $2.5 million to retire.

Save 50 Percent of Your Salary or More

Early retirees face a unique challenge to saving for retirement: Salaries for most college graduates peak in their 40s. If you retire at 40, you’ll be handicapping your savings by not contributing to your retirement accounts during your peak earning years.

If your employer provided a 401(k) match or pension, “the earlier you retire, the more of that you’re giving up,” too, Brand says.

Retiring at 40 also leaves you without access to Social Security or Medicare for 12 to 15 years into retirement, leaving you with one less source of retirement income and one more bill to foot.

And when you do reach full retirement age, your Social Security benefit will be reduced due to your lower average earnings. Billy Kaderli recommends creating a My Social Security account at to compare how much retiring early will reduce your Social Security benefit.

All these savings hurdles mean early retirees need to be saving 50 percent or more of their salaries each year. “It sounds hard and initially it is,” Adcock says, “but when you look at what you’re spending on, so much of it is stuff you either don’t need or don’t use.”

The last couple of years before retirement, he and his wife saved 70 percent of their income.

To ramp up savings, “attack the biggest expenses first: housing, cars and food,” says Chris Mamula, who retired at age 41 after burning out in his career as a physical therapist. He now shares his FIRE retirement wisdom on Can I Retire Yet? “By optimizing those areas (of your budget), you can develop a high savings rate.”

Avoid Lifestyle Creep

Essential to keeping your expenses down, and by extension your savings rate up, is keeping your lifestyle in check. Most people let their lifestyles and spending be defined by their income. If they earn $70,000, they spend $70,000. And when they get a $5,000 raise, they find $5,000 worth of additional things to spend it on.

“Once you inflate your lifestyle it’s hard to go back,” Mamula says. “Dissociate spending and earning. What you need to live has nothing to with what you earn.”

He and his wife (neither of whom made a six-figure salary) always lived off of only one salary and “never felt like we were sacrificing.”

“Lifestyle creep is very deceiving because you don’t know it’s happening until it gets to be too much,” Adcock says. If you want to retire early, you need to be living well below your means and investing every bonus and raise.

How to Invest to Retire by 40

Investing is essential to retiring by 40. Early retirees need the compound long-term growth that these investments provide. Without it, they’re likely to run out of money in retirement, or never reach their retirement savings goals.

In general, be as aggressive with your investments as you can tolerate. A “50-50, stock-to-bond portfolio probably won’t work because you have such a long timeframe and need to account for inflation,” Mamula says.

That said, “the most important thing is that you don’t panic” and pull out of the market, he adds. If you can’t tolerate the choppiness of a 100 percent equity portfolio, don’t use one.

This highlights an important facet of early retirement: It’s not for the risk-averse. The stock market may average 7 to 8 percent after inflation.

“It doesn’t go up in a straight line,” Billy Kaderli says. To accommodate for this, he tells early retirees to keep a couple years’ worth of expenses in cash so you don’t have to sell in a down market.

The Kaderlis had their entire portfolio in Vanguard’s S&P 500 fund (ticker: VFINX) when they retired. Today, at 67 years of age, they’ve shifted to a 60-40 stock-bond/cash allocation, but the majority remains in either the Vanguard Total Stock Market ETF (VTI) or the SPDR S&P 500 ETF (SPY).

The key is to start investing as early as possible. The longer you give your investments to grow, the more likely they are to match the stock market’s long-term average return. Looking back, the Kaderlis both they wish they’d started investing earlier.

Minimize Your Investment Expenses

Investing is another area to pay close attention to cost. Every dollar that goes toward investment fees is a dollar not being used to grow your retirement savings.

If your mutual funds charge a 1 percent expense ratio and your financial advisor charges an additional 1 percent, you’re already spending 2 percent per year on investment fees alone, Mamula says. Going back to the 4 percent rule, “if you have to pay 2 percent just to manage your money, you’re down to only 2 percent” left to spend in retirement.

If you’re investing in passive index funds, aim to keep your expense ratios at 0.1 percent or lower. Of course, the lower the better.

Have a Contingency Plan

Perhaps the best thing you can do for your early retirement is to have a contingency plan. Mamula is maintaining his physical therapy license so he can go back to work temporarily if needed. Their house is also a prime Airbnb venue.

Adcock and his wife built flexibility into their retirement budget by keeping discretionary spending their largest expense. “Initially you might think we’re just wasting money on things we don’t need but the benefit of increasing your discretionary money is you could also cut that stuff back when you have to,” he says.

The Kaderlis minimize expenses by utilizing “geographic arbitrage,” living in areas with low costs of living like Mesa, Arizona, and Lake Chapala, Mexico, their current balmy residence. While they’ve also monetized their blog, it’s really a labor of love. “If we stopped it tomorrow, it wouldn’t affect our lifestyle one bit,” Billy says.

You can’t control all the risks associated with early retirement, “but what you can control is having a plan,” Brand says. To this end, she recommends all future retirees – of the FIRE and conventional variety – speak with their financial advisors to stress test their portfolio against various scenarios.

“Once you pull the switch (on retirement), there’s no going back,” she says.

How the SECURE Act Affects Early Retirement

Effective as of January 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act is impacting the way some Americans save for and live in retirement. While these changes will affect conventional retirees more than early retirees, there are a couple of points to be aware of if you want to retire early.

First, the act delays the required minimum distribution (RMD) age from 70½ to 72. It also enables you to contribute to an IRA even after RMD age, as long as you have earned income.

The act also makes it easier to maximize your retirement savings while minimizing your working hours. Employers are now required to give part-time employees access to the company 401(k) plan. This is good news if part of your early retirement plan is to phase out of working or to work part-time in “retirement.”

At the same time, individual roth accounts, or IRAs, are more accessible for students and caregivers. The act considers stipends paid to graduate and postdoctoral students and “difficulty of care” payments received by caregivers compensation for IRA contribution limit purposes, making it possible for such individuals to contribute to an IRA without taking on additional paid work.

The act also now requires 401(k) plans to tell savers how much monthly income their current 401(k) savings could provide in retirement were you to purchase an annuity with it. Having these numbers readily available can make it easier to decide when to pull the trigger on your career.

If you do use an annuity, converting your 401(k) into one also got easier under the act as it’s now safer for employers to offer them.

Author: Coryanne Hicks

Source: Money. US News: How to Retire By 40 According to People Who Have Done It

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