Here's How Much Money You Actually Need to Retire at 55

How to approach your retirement savings so you can get off the 9-to-5 grind early and spend more time traveling.

Most people work 90,000 hours in their lifetime, which is one-third of the average life span, according to a study from Gettysburg College. Want to shave off a few hours from that number, cut your time on the 9-to-5 grind short, and get to retirement early so you can spend more time traveling? We talked to a financial educator about early retirement — specifically, how to retire at age 55 — to shed light on the subject.

"As the proverb goes, the 'best time to plant a tree was 20 years ago,'" Danetha Doe, a financial wellness educator, tells Travel + Leisure on the topic of when to start planning for retirement. "The second best time is today."

Active retired couple hiking in forest
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In other words, it's never too soon to start saving for retirement, especially if you want to retire early.

According to Doe, those looking to retire early should start saving as early as their 20s or 30s. However, she adds, "Don't despair if you didn't start saving in your younger years. It's also never too late to start saving for retirement. However, the longer you wait to start, the more strategic you will need to be to ensure you save enough for your retirement years."

To figure out just how much money you need to save to retire by 55, Doe suggests using a common rule of thumb: Take your current salary and multiply it by 10. Keep in mind that this is just a jumping-off point — there are many other factors you'll need to consider. To that end, Doe takes this formula and builds off of it.

She offers the following example: "If you earn $80,000 per year, the formula states you will need to have access to $800,000 to retire. Now, keep in mind, if you are planning to retire at 55, you will need to have enough saved for 20 years or more. Using the formula I just shared, that means you will be living on $40,000 per year or half of the salary you were accustomed to ($800,000 over 20 years). For some people, this would not be enough. Or, $40,000 per year may be enough if you choose to retire in a part of the world where the cost of living is [lower than you're used to]. My suggestion is to use the formula to set a baseline. Then, do research on what it would cost to live the lifestyle you wish to experience in retirement."

Want to make it to retirement even sooner? There are ways to do it, but it means putting in a lot of effort. Doe suggests looking into the F.I.R.E. approach. F.I.R.E. stands for Financial Independence Retire Early.

"The basic premise of F.I.R.E. is to cut expenses drastically and live off of 25 to 50 percent of your income," Doe explains. "With the extra money you have, you invest it into low-fee funds such as index funds."

Others can try to accomplish early retirement by creating a successful side business, which could help provide some additional income. Some even approach side hustling with the goal of generating passive income, which effectively creates an additional income stream without too much exra work (think: owning a rental property). However, even if you don't hit a magic number, Doe says there are still ways you can achieve that retirement feeling without giving up work altogether. Her methods may be particularly helpful for those wanting to travel more now, rather than waiting for their golden years.

Of course, Doe is also aware of the inflation woes of 2023. But she has a tactic for that, too.

"If you live in the U.S., consider transferring some of your funds into a Treasury I bond. For most of 2022, the interest rate was 9.62 percent, and it's now set at 6.89 percent through the first quarter of 2023," Doe explains.

She adds, depending on your risk tolerance, you may be interested in alternative investments, including wine or equity crowdfunding.

"Equity crowdfunding is a way to invest in innovative startups. Prior to 2012, investing in these startups was only available to folks with a net worth of over $1 million," Doe says. "Now, the everyday investor has an opportunity to be a part of this incredible wealth-building opportunity." (And just in case you need a little help, Doe says that her company will analyze different equity crowdfunding deals to help you decide if it's a good fit for you.)

"At the core of it all, most folks wish to retire early because they want financial freedom. They want to take a year to travel, explore an artistic outlet, or devote their time to philanthropy. All of these experiences can be achieved without retiring in the traditional sense," Doe says.

She adds, "My advice has remained the same over the last decade, but is especially relevant now. My overall financial advice for 2023 is to practice an abundance mindset. It will be tempting to pinch pennies or make financial decisions from a place of fear or scarcity, but that approach won't afford you a life of travel and leisure. Instead of focusing on how to save a dollar here or there, think about how you can create ten dollars here or there. Folks who practice an abundant mindset will thrive in 2023."

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