How to Retire at 50

How to Retire at 50
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Early Retirement Isn't Easy to Obtain, But It Could Be Worth the Effort

The idea of retiring at age 50 is so appealing—but the work and financial strategies it takes to get there might not be. The dedication and motivation it requires, particularly while you're also raising children, won't be easy, but the payoff of having more time to yourself when your kids are getting close to moving out of the house could be worth the effort.

Official Retirement Age

Although you can stop working at any time you like, official retirement age is 67 for those born in 1960 or later. That's the age that you can get full retirement benefits from Social Security, although you can pull reduced benefits starting at age 62. According to the Social Security administration, if you were born in 1960 or later, your benefits are reduced by 30 percent.

Additionally, you will be penalized if you use money stocked away in your 401(k) or IRA at age 50. It's not until you're 59 1/2 that you can begin withdrawing from a 401(k) or IRA without the 10 percent penalty, though there are exceptions. These include total disability, debt for medical expenses that are more than 7.5 percent of your adjusted gross income, and separation from your job through layoff, termination and quitting, among others.

How Much Money You Need

One simple math equation suggested by some financial planners to determine how much money you should have at retirement is to multiply your income by 25. If you make $75,000, you should have $1.875 million ready to support your lifestyle.

Making Smart Investments

That $1.875 million won't be just piled up in your savings account, most likely. Talk to a financial planner about how to create an investment portfolio that will help you achieve your retirement goals. When you're young, you can often make riskier investments that can provide bigger financial returns. However, if you want to retire as early as 50, you don't have as much time to recover from mistakes or losses.

Making Sacrifices

A woman who wants to retire at age 50 will have to make some hard decisions about what to spend and what to save—and generally should always err on the side of saving. This often means buying smaller houses, driving older cars and skipping family vacations or expensive summer camps for the kids.

When you do make big purchases, they should be smart ones that look at the big picture. For example, a house with a pool requires more money to insure over the long-run, or a cheaper car might need more repairs and end up being costlier than a newer, slightly more expensive car.

Consider Moving

Some people think about retiring in a place that doesn't have a high cost of living, even if it means selling the house—which offers up cash from the equity you've put into it over the years—and settling down in a domestic city that isn't so expensive, or even moving abroad.