The basics. If you retire at 55, and the average life expectancy is around 87, then 300K will need to last you 30+ years. If it's your only source of retirement income, until the state pension kicks in at around 67/68, then you are going to have to budget hard to make it last.
For a comfortable retirement, you'll need around £37,600 a year (London: £40,900) as a single person – that's about £3,133 a month, according to PLSA. With that, you'll be able to pay for the essentials and a few luxuries – a 2-week European getaway a year and eating out, for example.
On average, you'll need to have saved $1,051,814 to retire at 55 years old. This is based on the median earnings of Americans according to the Bureau of Labor Statistics' October 2023 Current Population Survey in weekly earnings.
How Much to Retire at 55? Fidelity estimated that those saving for retirement should have a minimum of seven times their salary by age 55. That means that if your annual salary is currently $70,000, you will want to plan on saving at least $490,000 saved.
But is it ever too late to start saving? The answer is no. It is of course best to start saving into a pension as early as you can, to maximise your retirement fund. But it's never too late to start planning your retirement, whatever age you are.
I'm 55 with £1m - Can I afford to retire? (Real case study)
What is a good monthly pension amount UK?
How much pension do you need to live comfortably? For a quick estimate, try the '50-70' rule. This suggests that you should aim for an annual income that is between 50% and 70% of your working income. So if you earn £50,000 now, you will want to achieve somewhere between £25,000 and £35,000 a year.
Want to know if you can start taking money from your pension plan but keep working and saving? The short answer is, yes you can. There are lots of reasons you might want to access your pension savings before you stop working and you can do this with most personal pensions from age 55 (rising to 57 in 2028).
In most cases, you will have to wait until age 66 and four months to collect enough Social Security for a stable retirement. If you want to retire early, you will have to find a way to replace your income during that six-year period. In most cases $300,000 is simply not enough money on which to retire early.
If you have multiple income streams, a detailed spending plan and keep extra expenses to a minimum, you can retire at 55 on $2 million. However, because each retiree's circumstances are unique, it's essential to define your income and expenses, then run the numbers to ensure retiring at 55 is realistic.
The rule of 55 allows penalty-free withdrawals from a 401(k) and 403(b) if you leave a job during or after the calendar year you turn age 55. This is an exception to the IRS rule that levies a 10% penalty on withdrawals from employer-sponsored retirement plans before age 59½.
The basics. If you retire at 55, and the average life expectancy is around 87, then 400K will need to last you 30+ years. If it's your only source of retirement income, until the state pension kicks in at around 67/68, then you are going to have to budget hard to make it last.
If you retire the day after an anniversary marking your first day on a job, it will give you another full year of service credit toward pension calculation. The very beginning or end of the year - If you don't have access to a healthy cash reserve that could cover multiple years, this might be a good option.
As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, the possibility of retiring with $500k becomes even more possible. In retirement, Social Security benefits can provide an additional $1,800 per month, on average.
How much money do you need to retire at 60? As a general rule of thumb, you need 20 – 25 times your retirement expenses. So, if you spend £30,000 per year, you'll need £600,000 – £750,000 in pensions, investments and savings to be able to retire.
If you want to retire at 55, you need to save £6,000 a year from the age of 21. Bear in mind that you usually can't access your pension pot until the age of 55, rising to 57 in 2028. This is why it's a good idea to use a mixture of pensions and ISAs.
You might be able to claim your deferred benefits from age 55 if you held special class status and were made redundant before age 50, and have not rejoined the NHS Pension Scheme. You can find more details about NHS Pension Scheme benefits on our NHS Pensions website.
One of the ways to retire at 60 without running out of money is to purchase an annuity. With annuities, you are guaranteed a steady income for life. The downside is that you need a large pension pot to get the desired annuity income you may want.
A $2 million nest egg could last 35 years if you budgeted roughly $57,000 every year. The average household in 2021 spent about $67,000. Proper financial planning can help you spread that $2 million out further, as well outpace inflation while you save for retirement.
This very much depends on your individual circumstances. To use extreme examples, if you spend £100,000 a year now and plan to carry that on in retirement, then your pot won't last very long. But if you only spend £10,000 then yes a million should be plenty!
Can I retire at 55 with £300k? On average a retired individual will spend £19,000 a year, whilst the average couple in retirement spends £25,000 a year. This means if you retire at 55 with £300k, an individual will run out of funds in approximately 15 years, and a couple in 12 years.
How much can I get from an annuity with a £300,000 pension pot? If you've got £300,000 in your pension pot, you could take £75,000 of it as tax-free cash. Then you could spend £225,000 on an annuity, giving you a pre-tax income of about £13,200 a year for the rest of your life.
If you retire at 55 with 300K and use the 3-4% rule (safe withdrawal rate) you would have around 9-12K per year to live on (assuming this was your only income).
You can take your whole pension pot as cash straight away if you want to, no matter what size it is. You can also take smaller sums as cash whenever you need to. 25% of your total pension pot will be tax-free. You'll pay tax on the rest as if it were income.
How many times can you take 25% tax-free from your pension?
You can take money from your pension pot as and when you need it until it runs out. It's up to you how much you take and when you take it. Each time you take a lump sum of money, 25% is tax-free. The rest is added to your other income and is taxable.
What Is the Rule of 55? Under the terms of this rule, you can withdraw funds from your current job's 401(k) or 403(b) plan with no 10% tax penalty if you leave that job in or after the year you turn 55. (Qualified public safety workers can start even earlier, at 50.)
