How Much Money Do You Need to Retire at 57?

Reviewed by Margaret JamesFact checked by Vikki VelasquezReviewed by Margaret JamesFact checked by Vikki Velasquez

To many of us who have to go to work every day, retirement sounds wonderful. Early retirement sounds like an even better idea. Instead of working until we’re in our 60s, retiring a decade earlier would give us that much more time to enjoy the good life.

Generation Z seems to agree. According to the 2022 Investopedia Financial Literacy Study, the median age when those age 25 and younger expect to retire is 57.

The question is: To retire at age 57—a decade before Social Security’s full retirement age for those born after 1960—how much money will it take?

Key Takeaways

• Retiring at age 57 takes careful financial planning. 
• If you earn the maximum Social Security benefits, it will make it easier to stretch your dollars.
• You will need to use your savings during retirement until Social Security kicks in at age 67.
• If you take Social Security at age 62 (the youngest age possible), the amount you receive will be permanently lower than if you wait. 

Important

Social Security payouts are adjusted annually. The increase for 2024 is 3.2%. In 2023, the increase was a historically high 8.7% due to inflation.

How Much Income Do You Need?

Let’s do some quick, back-of-the-napkin calculations to get a ballpark idea of how much income is required to make the dream of retiring at 57 come true.

Jot down the amount of money you spent last year. If you spent $55,000 to maintain your lifestyle, then you need the equivalent of $55,000 a year starting at age 57. If you spent $100,000, $200,000, $250,000, or some other amount last year, then that is the number you will need.

This assumes that the lifestyle you want next year is the same lifestyle that you enjoyed last year. Some experts suggest multiplying your current expenses by 80% or 90% to account for lower spending in retirement, but this won’t work for everyone.

Keep in mind that this doesn’t take into account things that might affect your expenses in a major way—either pleasant (a trip around the world) or unpleasant (a serious illness).

It also ignores the effects of inflation.

You’ll need adequate savings and other perhaps income sources to pay your bills until you reach full retirement age at 67 and your full Social Security benefit kicks in to help. If you take Social Security at 62—the earliest possible—your benefit will be permanently smaller than if you’d waited until your full retirement age.

How Much Savings Do You Need?

All other things being equal, you’ll need to have about 10 times the amount of your expenses saved up in order to generate sufficient income on which to live until you can start collecting Social Security benefits at age 67.

Important

This rough estimate (10 times your expenses) doesn’t take into account interest on your savings or the effects of inflation over the ten-year period.

Assuming $550,000 in initial savings and $55,000 in annual expenses, your balance could be $108,640.65 at the end of ten years at a 3% interest rate. This interest cushion may help to offset the inflation rate over the decade.

To calculate this ending figure, you can use a future value calculator with 10 periods, a present value of $550,000, an interest rate of 3%, and periodic withdrawals of $55,000 (withdrawals can be entered as a negative value if the calculator asks for periodic deposits).

The Government’s Role

What if you look at those numbers and think to yourself that you don’t have nearly enough money to maintain your current lifestyle for a decade and still pay your bills, but you still want to retire at 57? This brings us to a second back-of-the-napkin calculation of how much you need to get by in early retirement.

Again, start with the simplest of assumptions: At age 67, what would you earn if Social Security were your only source of income at retirement? Say you started work at age 20. You earned enough to qualify for the maximum possible Social Security benefits. In this scenario, the maximum that a retiree age 67 in 2024 could collect is $3,911, or $46,932 per year. In 2023, it was $3,808 per month, or $45,696 per year.

So, let’s assume that’s your minimum: an annual income of $46,932. By that math, you would need $469,320 total to pay your bills for a decade until the first benefit check arrives.

Of course, you can elect to start collecting Social Security benefits a bit earlier, at age 62. That will significantly lower the size of the payments for the rest of your life, however.

What Is the Average 401(k) Balance for People at Age 65?

The average account balance for Vanguard participants aged 65 and up was $272,588 in 2023. The median balance for this age group was $88,488.

Is It Worth Retiring Early?

Whether or not it is worth retiring early will be different for every individual and depend on a variety of factors, such as how much money a person has saved for retirement and what kind of life they want to live in retirement. Benefits of retiring early include the ability to travel without time restrictions, the ability to start one’s own business, better health at a younger age to enjoy retirement, and more time to spend with loved ones.

How Much Money Do I Need to Retire?

The amount of money you need to retire will depend on your finances, the lifestyle you lead and want to lead in retirement, and the types of expenses you have. Generally speaking, experts advise having 80% to 90% of your annual pre-retirement income saved for each year of early retirement. You can estimate the sum you can safely withdraw using the 4% rule.

The Bottom Line

These assumptions do not reflect the realities of a complex world. While the math is easy to calculate, it does not take into account the variables of investment returns, rising living costs, unexpected expenses, potential healthcare costs, and a host of other factors—as well as potential changes in personal spending habits and lifestyle.

Whichever of these two methods you choose, the bottom line is you’ll need a hefty sum in savings to tide you over until Social Security kicks in.

Read the original article on Investopedia.