Nearly everyone dreams of retiring early. As you get older and closer to retirement age, it's hard not to fantasize waking up naturally each morning without a blaring alarm, and spending your days however you please.

But more workers are facing the truth that early retirement may not be in the cards for them. In fact, nearly three-quarters (74%) of Americans say they expect to work past retirement age, according to a 2017 Gallup poll, and the average nonretired American also predicts they'll retire around age 66.

Couple sitting on the beach looking at the sunset

See yourself here at 56? Start planning now! Image source: Getty Images

Then there are the millennials. These younger workers have a much more optimistic view of retirement, with more of them hoping to retire much earlier than their parents. In fact, the average millennial worker dreams of retiring at age 56, according to a survey from assisted-living company Provision Living. (For comparison, the average baby boomer's dream retirement age was 64.)

Aiming for an ambitious retirement age isn't a bad thing. It's fantastic to have goals, and if you're willing to work harder now, you can play harder in retirement. That being said, if your goal is to retire early, you need to ensure that your finances are on the same page as your hopes and dreams.

When dreams and budgets don't align

The major problem with planning for an early retirement is that you'll need to supercharge your savings in the decades leading up to it. And while many millennials may want to retire in their mid-50s, nearly half of them (43%) have $5,000 or less stashed in a retirement fund, according to the Provision Living survey. That's not going to go very far.

Of course, millennials are young. Members of the millennial cohort are between 23 and 38 in 2019, so they still have decades left before retirement is within reach. But the loftier your retirement goal, the more early and aggressive saving you need to do.

For example, say you want $1 million saved by the time you turn 55. (You may need more or less than that, depending on a variety of factors, but for simplicity's sake, let's make your goal $1 million.) If you started saving at age 20 and earned a 7% annual rate of return on your investments, you'd need to save around $600 per month for 35 years to reach that goal. If you're on track with that savings plan, you'd need to have around $43,000 saved by the time you're 25.

Is that realistic for most people? Probably not. But does that mean you should give up on your ideal retirement altogether? Of course not! It's easy to dream big -- it's just not so easy to take the required steps to achieve those goals. The key is setting manageable goals, then creating a savings plan that you know you can stick to.

A retirement dream you can (realistically) achieve

If your savings are falling a little (or a lot) short of where they should be, all hope of exiting the rat race sooner is not lost. You may not be able to retire as early as you want, but it doesn't mean you can't retire at all -- but you need to adjust your time horizon.

The first step is figuring out about how much you'll need to have saved for retirement. The longer you wait to retire by continuing to work, the less you'll need to save each month -- so adjust your retirement age based on your budget and how much you can reasonably put aside every month.

One simple way to get a ballpark figure of how much you need to have saved is to use an online retirement calculator. There are dozens out there, and each one is slightly different, so it's a good idea to plug your numbers into a few different calculators to get a range of answers.

At this point, consider any other sources of income you'll have in retirement. These can include Social Security benefits, a pension, annuities. To get an idea of how much you'll be receiving in Social Security benefits, check out this calculator. Keep in mind that it's only an estimate, but it can at least keep you from planning based off a wild guess. Also remember that the earliest you can begin claiming benefits is age 62 (and if you claim that early, your monthly benefits will be reduced). If you hope to retire before that, you won't have income from Social Security to lean on until you become eligible.

So, let's say you plug your numbers into a retirement calculator and find that you'll need to have $700,000 saved by the time you retire. If you're 35, and you want to retire at 60, that means you'll need to save around $900 per month, assuming you're earning a 7% annual rate of return on your investments. But if you hold off until 67 to retire, you can reach your $700,000 goal by saving a little more than $500 per month.

Also keep in mind that your goal for how much you need to save for retirement may change depending on when you retire. If you spend more years in retirement, you'll need more money. On the other hand, if you delay retirement by a few years, you probably won't need to save as much. So by delaying retirement by a few years, you'll need to save less each month and you'll have a smaller, more achievable goal.

Retirement planning isn't easy, but it's absolutely necessary if you want to realize your early retirement dreams. There's nothing wrong with hoping to retire before most people, but you'll need to develop a realistic financial plan and a good savings habit.

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