How Much Money Do You Need to Retire at 56?

To most of us who have to go to work every day, retirement sounds wonderful. Getting out of the rat race early sounds like an even better idea. Instead of working until we're in our 60s, retiring a decade earlier would give us that much more time to enjoy the good life. The question is: To retire at age 56—10 years sooner than the full Social Security retirement age for those born between 1943 and 1954—how much money will it take? 

Key Takeaways

  • Retiring at age 56 takes careful financial planning. 
  • If you earn the maximum in social security, it will make it easier to stretch your dollars.
  • You will need to use your savings during retirement until social security kicks in at age 66.
  • If you take social security at age 62, the amount you receive will be lower than if you wait. 

How Much Income Do You Need?

Let's do some informal, back-of-the-napkin calculations to get a ballpark idea of how much income is required to make the dream come true.

Jot down the amount of money you spent last year. If you spent $35,000 to maintain your lifestyle, then you need $35,000 a year starting at age 56. If you spent $100,000, $200,000, $250,000, or some other amount last year, then that is the number you will need.

This simply assumes that the lifestyle you want next year is the same lifestyle that you enjoyed last year, so you need adequate savings and other income sources to pay your bills once you reach full retirement age at 66.

But it doesn't take into account things that might affect your expenses in a major way, either pleasant (a trip around the world) or unpleasant (a serious illness).

It also ignores the insidious effects of inflation.

How Much Savings Do You Need?

If you retire, the earned income stream is shut off. So, how much in savings do you need to pay the bills?

All other things being equal, you'll need to have about 10 times the amount of your expenses saved up in order to generate sufficient income on which to live until you can start collecting Social Security benefits at age 66.




Income Requirement =




Income Requirement =




Year 1


$350,000 savings


$1,000,000 savings


Year 2


$315,000 savings


$900,000 savings


Year 3


$280,000 savings


$800,000 savings


Year 4


$245,000 savings


$700,000 savings


Year 5


$210,000 savings


$600,000 savings


Year 6


$175,000 savings


$500,000 savings


Year 7


$140,000 savings


$400,000 savings


Year 8


$105,000 savings


$300,000 savings


Year 9


$70,000 savings


$200,000 savings


Year 10


$35,000 savings


$100,000 savings

Until you can start collecting Social Security benefits at age 66, you'll need approximately 10 times the amount of your annual expenses saved up to generate sufficient income on which to live comfortably.

The Government's Role

What if you look at those numbers and think to yourself that you don't have nearly enough money to maintain your lifestyle for a decade and still pay your bills. But you still want to retire at 56. This brings us to a second back-of-the-napkin calculation of how much you need to get by in early retirement.

Again, start with the simplest of assumptions: At age 66, Social Security will be your only source of income at retirement. You started work at age 20. You qualify for the maximum possible Social Security benefits. In this scenario, the maximum that a retiree in 2021 could collect is $3,895 per month. That comes to $46,740 a year.

So, let's assume that's your minimum: an annual income of $46,740. By that math, you would need $467,400 total to pay your bills for a decade until the first benefit check arrives.

Of course, you can elect to start collecting Social Security benefits a bit earlier, at age 62. That will significantly lower the size of the payments, however.


How To Retire At 50

The Bottom Line

Naturally, these assumptions do not reflect the realities of a complex world. While the simple math is easy to calculate, it does not take into account the variables of investment returns, the rising cost of living, unexpected expenses, potential healthcare costs, and a host of other factors as well as potential changes in personal spending habits and lifestyle.

Whichever of these two methods you choose, the bottom line is you'll need a tidy sum in savings to tide you over until Social Security kicks in.

Ask yourself: Can you cut any of your current expenses? Will you have a pension check waiting for you 10 years from now? Do you stand to inherit some money? Does your spouse have an income that can help fund your plan? Do you even qualify for the maximum Social Security payment? Can you live on the amount of Social Security you do qualify for?

The answers to these questions are different for everyone. Retirement planning is a highly personal process. Only you know all the specific details of your personal financial situation, and only you know what sacrifices you are willing to make to realize that dream of kissing the working-stiff life goodbye.

Article Sources
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  1. Social Security Administration. "Benefits Planner: Retirement - If you were born between 1943 and 1954."

  2. Social Security Administration. "Retirement Benefits."

  3. Internal Revenue Service. "2021 Social Security Changes."

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