Can I Retire at 55? Tips for Early Retirement

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Most people retire around age 62, and most retirement advice is geared toward those who retire well after age 55. So if you’re retiring at 55, you need to be especially careful about typical rules and strategies-because they might not apply to you.
🤩 Check out my free online retirement calculator designed for early retirement: www.approachfp.com/early-reti... 🤩
For instance, getting health coverage could be a challenge after you leave your job. But you might have several options, and some tax strategies might help you save money on premiums.
Get free retirement planning resources: approachfp.com/2-downloads/
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If you found the video helpful, you'll enjoy the information above!
There’s also the question of where to get money from before age 59.5. Retirement accounts typically have early withdrawal penalties, but the tax code offers several ways to get money out early. We’ll review those here.
Related videos:
- Health Care in Retirement: • Healthcare in Retireme...
- Retirement Spending Reality (Patterns): • Retirement Spending: T...
Not many retirement calculators accommodate this strategy, whether you’re retiring early or delaying Social Security with a bridging strategy. Calculators often assume that you’ll start getting pension or Social Security income immediately at retirement, but if you leave work at 55, things may look different for you.
Fortunately, there are several tools available to help you run the numbers. I obviously do this with clients, but if you want to DIY, you can try calculators that range from simple to complicated.
🖩 Some calculators and resources for early retirement planning:
- New Retirement (paid and free versions): www.newretirement.com/
- Schwab calculator: www.schwab.com/retirement-pla...
- FI Calc: ficalc.app/
- Health insurance tax credit calculator: www.kff.org/interactive/subsi...
- Read the article here: www.approachfp.com/retire-at-...
Use all of the above at your own risk. Read the assumptions and privacy policies carefully, and compare results among various tools. Disclosure: I am able to manage client accounts at Charles Schwab, but I receive no compensation or other benefits for including their calculator here. I am not affiliated with the calculators above at the time of publishing, and I don’t expect to be.
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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states. Flat-fee and one-time planning options are available.
CHAPTERS:
00:00 Retiring at 55 Is Different
00:34 Why 55?
01:20 Health Insurance
06:06 Access to Funds Without Penalty
11:06 Shouldn’t I Minimize Taxes?
12:54 Do I Have Enough to Retire Early?
13:19 Example of Retirement at 55
16:12 Tips for Planning and Calculating
IMPORTANT:
It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Retiring early brings additional risk as you have additional years of funding and fewer years of working. Plus, more time means more uncertainty. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.

Опубликовано:

3 авг 2024

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Комментарии : 52

@Veganisbadhunter-wx5nt Год назад

I retired at age 55 in April 2022. What I have found as the determining factor is your monthly expenses and debt. A paid off house and zero debt combined with low monthly expenses makes retirement doable. My monthly expenses average $1650/month. I've reduced the expenses to 12 items. 1. Food 2. electric 3. natural gas 4. water/sewer 5. trash/recycle 6. internet 7. cell phone 8. Auto insurance 9. home insurance 10. property tax 11. gasoline 12. home/auto repairs. Entertainment spending is fairly low in my situation because i can find many free things to do and see for minimal cost.

@waynewallace2061 Год назад

You must have employer provided health insurance. I was self employed and retired at 51. Health insurance premiums were our top expense.

@grissomfire 10 месяцев назад

I retired at 55 and 1 month. But carried my healthcare with me at the same price. If I knew how easy retirement was I would have left earlier. Get out whenever you can.

@glendacastillo6504 Год назад

Retired from USAF at age 47 years old. I have TRICARE for life and VA health insurance. Thank you, Lord!

@chrisniner8772 8 месяцев назад

You're welcome. It takes a bunch of taxpayers to cover your benefits

@teams3345 4 месяца назад

Retired at 56 (almost 57). I had one years severance. Medical until 65. Took SS at 62. I am now 63 close to 64 and all is well.

@gregthomas2448 Год назад

Just sharing my situation, I retired September 30, 2022 age 55 under a VERA/VSIP early retirement offer from the federal law enforcement agency where I worked. My retirement is called FERS. I’m very happy I did it, full pension and full health insurance forever. I was hired right out of college age 21 in 1988 and saved the maximum in my Thrift savings account 401K, I paid into Social Security and my annuity is based on my high three salary which was 160K. So basically a three (3) tier pension. The VSIP was a bonus of 25K and if I need money from the 401K under the rule of 55 I avoid the 10% IRS penalty. Wish you all the best and always remember, nobody ever regretted retiring early 🏆

@30-Year_Accountant Год назад

Greg, your story is encouraging. Like you, I work for the feds and plan on retiring in December 2023 at 56 with 30 years of service. I have 7 figures in the TSP and will have a final salary of about $172k. While I know I should be ok financially, I am still nervous about retiring but your story allays some of my apprehension/anxiety. Thanks!

@Nola1176 Год назад

What will be your monthly benefit?

@Nola1176 Год назад

@@30-Year_Accountant what so be your monthly benefit?

@chrisniner8772 5 месяцев назад

I'm living 6 pack to 6 pack.

@David-qr8pi 2 месяца назад

Congratulations on your retirement. I hope to get there soon.

@christopherhennessey8991 Год назад

I did retire at 55,that was nine years ago. I’m an RN, and was fortunate that I worked at a public/teaching hospital-part of the state retirement system. The Regular Class retirement service guidelines at the time were :30 years regardless of age and 62 years of age with at least six years of credited service .The state pension system also offered an investment plan. However, there was also the DROP(deferred retirement option program )offered by my former of which I participated. It was eligible for those in the pension program who met the credited service requirements. An employee was then legally retired upon entering DROP ,and worked as a retired employee for their employer . 5years was the max time one was permitted to work in the DROP ,The 457B money was a nice bonus in to addition to the monthly pension the employee receives upon complete separation from the employer. The payouts of unused accrued time : sick,vacation,comp time extended illness time were a nice chunk of change.Consider myself very fortunate. Claimed Social Security at 62 providing me a dependent benefit ,for my youngest child .Retiring at 55 and claiming Social Security worked out very well for me.

@lseh4720 9 месяцев назад

Thank you for explaining things to the public. You’re very kind to share your knowledge.😊

@ApproachFinancial 9 месяцев назад

Thanks for watching!

@jefflloyd394 Год назад

Thanks, sound summary

@jeffnguyen902 Год назад

Thanks for your info.

@ApproachFinancial Год назад

Thanks for watching!

@blackbeardpapa9547 Год назад

thank you! This is great!

@ApproachFinancial Год назад

Glad it was helpful!

@davidfolts5893 Год назад

Excellent content, Justin. Thank you!

@ApproachFinancial Год назад

Thank you, David-much appreciated!

@davidfolts5893 Год назад

@@ApproachFinancial 👌

@Pje3ski Год назад

Good video, your voice and the way you talk reminds me so much of half life. The guy in the suite.

@ApproachFinancial Год назад

Thank you for watching! I'm not familiar with that, but now I'll have to keep an eye out.

@richhudnut5110 Год назад

One of the best retire early videos on YT...

@ApproachFinancial Год назад

Thank you!

@morkmckerr Год назад

Have you looked at the cost of cobra? How is that a realistic option? Why is that so high on your list?

@johnb1571 Год назад

Great video!! We used the same software. we are retiring July 2023, under the rule of 55. Would have been much harder to figure out w/o the software.

@ApproachFinancial Год назад

Thank you! Yes, the software (Right Capital, as you know) certainly has a lot of capabilities. Good to hear that you made a plan and it's going well for you.

@johnb1571 Год назад

@@ApproachFinancial yeah hard to believe once we got our minds right we will have gone from zero to retired in 34 months with over $500k saved. took 18 months of playing with RC to get it all worked out.

@chessdad182 Год назад

Funny I did some of my best work from 55 to 65. Heh Heh. Now my body began falling apart, starting in the late 50s, but still it helped to keep working until later.

@blackbeardpapa9547 9 месяцев назад

re-watching this. Can you do a video about freelance with his/her own 401k ?

@bigmoose143 14 дней назад

Love your advice! I am 53 and want to retire at 55. I would love to avail your services. How can I speak to you and schedule something?

@ApproachFinancial 12 дней назад

Thank you for the kind words. To learn about hiring me, please visit ApproachFP.com. The Pricing page and the About page should both be helpful.

@user-py7wp6nw9h 2 месяца назад

i m 57 and I think the business environment is forcing me to retire early. Most likely I will tackle my brokerage first, as to reach 60 or 62, when I plan on taking 401k out, as I delay my social security until 70. My wife is still working and being younger than me by a decade, she can still save on her side, while I spend mine.

@chrisniner8772 Год назад

When you have 10 percent inflation and a 3 percent return the numbers change just a wee bit.

@damis2372 Год назад

I have 401k with my employer. I got laid off and I am 55 year old. Company is giving me 6 month of severance pay (paid Bi-weekly). Am I able to utilize the rule of 55 now or do I have to wait for 6 months (after my severance pay ends)?

@ApproachFinancial Год назад

My view is that you can use the rule if you officially terminated employment and you otherwise qualify (over 55). That said, I obviously don't know the details of your arrangement with the employer, so it would be best to check with the Plan Administrator to verify what your options are. So, a primary question at this point might be if you've officially terminated employment (or not).

@damis2372 Год назад

@@ApproachFinancial I am officially terminated.

@pathkris2984 8 месяцев назад

@@ApproachFinancial I called and talked about the rule of 55 with my 401k plan administrator and the person I spoke to, told they will follow all rules of withdrawal and he was not aware of such a rule of 55 and not paying penalty. He stuck to the argument until 59.5 there will be a penalty. How do I make them realize this rule? Any pointers? If they do withhold such a penalty, is there a way to get it from IRS during tax filing as it is not applicable? Thanks.

@ApproachFinancial 8 месяцев назад

That's a good question, and I think there are two things going on. One is a potential tax penalty, which hopefully won't apply if you satisfy all of the IRS requirements. The other is withholding, which may be required even if you qualify for a penalty-free withdrawal. The withholding would generally still apply if you're taking a cash distribution after you leave your job. That said, if they end up withholding more than you owe the IRS (based on everything else going on with your return), you can potentially get the excess back as a refund after filing your taxes. I would discuss the situation with your tax preparer before doing anything to make sure you know how things will unfold. Again, you probably can't do much about mandatory withholding, but you can possibly avoid the early distribution penalty when using the so-called "rule of 55."

@pathkris2984 8 месяцев назад

@@ApproachFinancial Thanks for the clarification. I am good with the mandatory withholding, which I can get back after filing. If they withhold the penalty amount, say by mistake, is that amount also included as a withholding or that is withheld and shown as a separate amount? Is there a way to identify that they withheld a penalty also in addition to the mandatory withholding amount not just by the looking at the amount withheld but by any other means? Thank you.

@dundeeecroc Год назад

I'm 58 and debt free with savings and money aside, can I retire at 62?

@ApproachFinancial Год назад

That is the big question for most people, and it's hard to know without having all of the details about somebody's situation. Even then, there are unknowns. Some of the videos below (and linked calculators) might help you get a better idea, but doing plenty of detailed financial planning is the best way to get a meaningful answer to that question. You can do that yourself, or you can get help from a financial planner, depending on your preferences. - Do you need $1 million (sometimes yes, sometimes no): ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-Xqdwj0L0lSk.html - How much might you spend? ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-B8nUnTVbhEs.html

@rickchandler2570 Год назад

My understanding is ACA is based off your last W2 and with that being said, if my last year before retirement I make say $150k then I'm going to pay through the nose for insurance but after that first year, my next W2 is going to be significantly smaller and that's when the ACA really makes sense. Please correct me if I'm wrong on that.

@ApproachFinancial Год назад

Good question, and I'd say the credit is based off the expected income for the year you want coverage (but not the prior year). It can include income beyond W2 wages, so that could also affect things. For some more info: www.healthcare.gov/income-and-household-information/income/ That said, things could still work out more or less the way you're hoping. At some point, your income drops, and then you can use a lower income for bigger credits.

@ariefraiser140 Год назад

Correction...The ACA is based off the year you get insurance under the ACA. The last W2 may be used as an estimate but what matters as far as the subsidy is how much you made the year you were on insurance under the ACA.