Can You Retire Early?

Our team has long believed that no retirement plan is complete if it doesn’t incorporate your goals for retirement. Many people set a goal of retiring by a certain age. Some people set a goal of retiring when they reach full retirement age for Social Security₁ while others wait until they become Medicare eligible (age 65). However, other people are more ambitious and set a goal of retiring in their late 40s or early 50s. Today, we’re going to discuss retiring at 50 and whether you can do it.

If You Plan on Retiring at 50, What Are You Going to Do in Retirement?

Being a discipline saver is obviously important if you want to retire at 50. It’s also crucial to understand the rules (taxes, early withdrawal penalties, etc.) of the retirement accounts you’ve been saving to. But there’s more to retirement planning than saving until you reach a certain benchmark that you’re comfortable with. If you have a goal of retiring at 50, that’s great, but what are you going to do in retirement? There’s no way to know if you have enough to retire at 50 (or any age) if you don’t define your desired retirement lifestyle.

Finding Financial Independence

How much do you think you need to retire? Is it $1 million, $2 million, or substantially more than that? Rather than pinpointing a certain number that you need for retirement, we encourage you to go through the financial planning process and build a goals-based financial plan. In addition to being tailored toward your personal goals, your plan needs to be stress tested through various economic conditions.

And to be clear, your investment plan isn’t the same thing as a financial plan. Your financial plan needs to consider taxes, estate planning, insurance planning, when to claim Social Security, and your investments. Think of your investments as the engine that drives your financial plan.

Your financial plan should serve as a permission slip to do the things you love with the people you love. If you focus on saving a specific amount for retirement or reaching a certain age before retiring, you might be able to retire and not even know it. So, rather than thinking about how much you need to retire, think about what it means to be financially independent.

Being financially independent means that you get to wake up every day and do the things you want to do because you want to do them and not because you need a paycheck. If you choose to continue to work, it’s because you want to.

The FIRE Movement

There has been a movement over the past 30-plus years that has been focused on financial independence and retiring early. The FIRE (financial independence, retire early) movement initially took off after Vicki Robin and Joe Dominguez published Your Money or Your Life in 1992.₂ Dominguez retired at 31 after working on Wall Street. But just because he retired at 31 doesn’t mean that you’ll be able to retire at 31. The same thing can be said if you have a friend planning to retire at 50—just because it worked for them doesn’t mean that it will work for you.

To sum up the FIRE movement, it focuses on retiring as soon as possible and then fulfilling your goals in retirement. At Modern Wealth, we’re also passionate about helping people do what they love with the people they love. We also believe that it’s critical to have a personalized financial plan that is designed to help you understand your retirement possibilities.

The hardest part of retirement planning for some people is getting started. Whether you want to retire at 50 or want to retire much sooner or later than that, take some time to review our Retirement Plan Checklist. It consists of 30 yes-or-no questions that gauge your retirement readiness and age-and date-based timelines of retirement considerations.

Retirement Plan Checklist

FIRE Sub-movements

While the FIRE movement has been around for a few decades, it had some peaks and valleys during the COVID-19 pandemic. On one hand, some people were motivated to retire early because they didn’t want to return to in-office work. However, high inflation and job layoffs made it difficult for others to achieve financial independence and retire early. Again, when you can comfortably retire depends on your situation.

As the FIRE movement has had its ups and downs, there have also been some sub-movements that have emerged in recent years.₃

Lean FIRE

Lean FIRE is practiced by people who take a minimalistic approach to life. The FIRE movement motivates them to no longer have to work and to accumulate enough savings to account for their basic needs. The main problem we see with this sub-movement is that personal goals aren’t factored into their retirement planning.

Fat FIRE

Fat FIRE focuses on significant saving to retire early so they can eventually spend more in retirement and live out their desired lifestyle. There can be issues with this sub-movement as well. As we mentioned earlier, people can get so focused on saving that they don’t truly understand the rules of the accounts that they’re saving to. In some cases, followers of Fat FIRE might even be able to retire earlier if they have a better understanding of their asset allocation and tax allocation.

Slow FIRE

Next up is Slow FIRE. People who are dedicated to the Slow FIRE movement have the goals of financial independence and retiring early in mind but have substantial debt to pay down before they can build their financial wealth. It’s important to remember that there’s bad debt and good debt. If you want to retire early but have some low-interest debt to pay off, you might be able to carry that debt into retirement and be OK. But if you have high interest debt, such as credit card debt, you should consider paying that down as soon as possible rather than retiring early.

Barista FIRE

As we mentioned earlier, some people achieve financial independence but choose to keep working. The Barista FIRE sub-movement is similar to that, except they save enough to retire from their primary job and then take a different part-time job to accumulate additional savings and to receive health insurance benefits. Health insurance is obviously something that needs to be strongly considered, especially prior to retirement. Make sure that you understand the options that are available to you if you’re planning to retire before 65.

Coast FIRE

Lastly, there’s the Coast FIRE sub-movement. The Coast FIRE followers focus on accumulating as much financial wealth as possible and then rely on their investments and compound interest to ensure that they can get through retirement. Compound interest can be a very powerful tool. But remember that investments are just one part of the retirement planning equation. The other factors that we mentioned earlier—your goals, taxes, estate planning, insurance planning, Social Security claiming strategy—all need to be considered as well.

How Long Do You Expect to Live?

There are pros and cons to the FIRE movement and its sub-movements. If you’re dead set on retiring at 50 (or another age milestone), do you have a forward-looking financial plan that’s tailored to your goals and that’s been stress tested?

One thing that’s very important to stress test for is life expectancy. No one knows how long they will live, but you can plan for it via stress testing. For example, let’s circle back to Joe Dominguez and how he retired at 31. We don’t know anything about Joe’s retirement goals, but we hope that he has a plan that can support his current and future needs, wants, and wishes.

According to the 2024 Peterson-KFF Health System Tracker,₄ the average life expectancy in the U.S. in 2022 was 77.5. But that doesn’t mean that Joe should plan to be retired for 36.5 years. We implore clients to take a conservative approach to reduce the chances of running out of money in retirement. Remember that the goal isn’t just to get to retirement; it’s to get through retirement. And if you want to leave a legacy, you’ll need to ensure that you’ve saved enough so that your spouse and beneficiaries are taken care of if you pass on before them.

So, Can You Retire at 50?

When our team builds financial plans, we put our clients’ interests first. We’re committed to building a plan that empowers someone to gain confidence to make informed decisions with their money, manage financial stress, and time to do the things they love.

We take a team approach to building each plan as well. Rather than depending on one advisor to help you retire at 50 (or whenever you want to retire), consider working with a team of professionals. At Modern Wealth, our CFP® Professionals, CPAs, CFAs, estate planning professionals, insurance specialists, and company retirement plan collaborate on our clients’ behalf when building and reviewing their plans.

Whether you’re trying to retire at 50, wondering how to become financially independent, or wanting to learn what it’s like to work with a wealth management team, start a conversation with our team today. We look forward to meeting with you to build a plan that’s tailored to your unique goals.

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Resources Mentioned in This Article

Downloads

Retirement Plan Checklist

Other Sources

[1] https://faq.ssa.gov/en-US/Topic/article/KA-01885

[2] https://www.playingwithfire.co/whatisfire

[3] https://money.usnews.com/investing/articles/steps-to-retire-at-50

Investment advisory services offered through Modern Wealth Management, Inc., a Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management a Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.