By SmartAsset Team

A man trying to figure out how much he needs to retire at age 50.

Retiring at 50 offers freedom and time to pursue personal interests, but it requires careful financial planning. Key factors include lifestyle needs, long-term savings, healthcare costs, inflation and market changes that could affect retirement funds. Working with a financial advisor can help you create a strategy to manage savings, investments and expenses for a secure retirement.

How to Calculate What You Need to Save for Retirement

The amount you will need to retire at 50 depends on your lifestyle and financial situation. A common guideline is to aim for 80% of your pre-retirement income each year. Start by reviewing your current expenses and estimating future costs. A retirement calculator can help with planning.

Consider both fixed costs, like housing and utilities, and variable expenses, such as travel and entertainment. Don’t forget to account for inflation, which can eat into your purchasing power over time. Healthcare costs, in particular, tend to rise faster than general inflation, so it’s prudent to allocate a larger portion of your budget to medical expenses. 

Social Security benefits and pensions can significantly impact the amount you need to save for retirement. For many, Social Security will cover a portion of retirement income, but it often isn’t enough. By calculating the gap between your expected income and your projected expenses, you can determine how much you’ll need to save to bridge that gap.

How to Create a Retirement Savings Plan

Start by figuring out how much you can save each month. Reviewing your income, expenses and possible spending cuts can set you up strategically to build a strong foundation for your savings plan.

Deciding where to put your savings is key. Retirement accounts like 401(k)s, IRAs and Roth IRAs offer different tax benefits. A 401(k), for example, may include employer matching, while a Roth IRA allows tax-free withdrawals in retirement. Choosing the right mix could help maximize your savings.

Inflation and healthcare costs will also affect your retirement expenses. Prices rise over time, and private health insurance can be costly before Medicare begins at 65. So planning for these costs early can help keep your finances stable.

Finally, your retirement plan should account for taxes. Withdrawals from 401(k)s and IRAs are taxed as regular income, while Roth accounts allow tax-free withdrawals. Smart withdrawal management can minimize liability and extend savings.

Example of a Retirement Savings Portfolio for Age 50

A woman creating a plan for early retirement.

A common retirement guideline is to save at least 25 to 30 times your expected annual expenses to maintain long-term financial stability.

For example, if you plan to spend $60,000 annually, you would need $1.5 million using the 25x rule or $1.8 million for a more conservative estimate. This estimate aims to cover living costs.

Investments play a key role in maintaining your savings. Depending on your portfolio’s withdrawal rate, you could earn steady income, while your savings continue to grow over time. 

With a 4% withdrawal rate, you can get:

  • $60,000 per year ($1,500,000 × 0.04) following the 25x rule.
  • $72,000 per year ($1,800,000 × 0.04) following the 30x rule.

And, with a 5% withdrawal rate, you can get:

  • $75,000 per year ($1,500,000 × 0.05) following the 25x rule.
  • $90,000 per year ($1,800,000 × 0.05) following the 30x rule.

Additional income sources can reduce the amount needed from savings. Social Security is not available until at least age 62, so early retirees must rely on investments or other income sources like rental properties, dividends, or part-time work.

Tips for Saving Enough to Retire at 50

Retiring early can be complicated, but these six common steps can help you create a plan:

  • Start saving early and consistently: Begin saving as soon as possible to take advantage of compound interest. Even small, regular contributions to your retirement fund can grow significantly over time, making it easier to reach your financial goals.
  • Maximize retirement account contributions: Contribute the maximum allowable amount to retirement accounts like 401(k)s and IRAs. These accounts offer tax advantages that can boost your savings, and many employers offer matching contributions, which is essentially free money.
  • Diversify your investment portfolio: A well-diversified investment portfolio can help manage risk and increase potential returns. Consider a mix of stocks, bonds and other assets to balance growth and stability, adjusting your allocations as you approach retirement.
  • Live below your means: Adopt a frugal lifestyle to increase your savings rate. By prioritizing needs over wants and avoiding lifestyle inflation, you can allocate more funds toward your retirement savings.
  • Plan for healthcare costs: Healthcare can be a significant expense in retirement, especially if you retire before Medicare eligibility. Consider investing in a health savings account (HSA) or other savings vehicles to cover potential medical expenses.
  • Review and adjust your plan regularly: Life events like marriage, having children, or changing jobs can affect your finances. Market shifts and tax law updates may also require you to make adjustments to stay on track.

Bottom Line

A man reviewing his retirement plan.

Retiring at 50 is a big goal and the amount you need depends on costs like housing, healthcare, travel and daily expenses. Inflation and market changes can also affect your savings over time. Reaching this goal requires smart saving, investing and a clear understanding of your financial needs.

Retirement Planning Tips

  • A financial advisor can help you adjust your savings goals, develop a personalized investment strategy and navigate changes in tax laws and market conditions. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • SmartAsset’s Social Security calculator can help you estimate future monthly government benefits.
  • Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

Photo credit: ©iStock.com/Riska, ©iStock.com/nensuria, ©iStock.com/Zinkevych

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