Americans are working longer than ever, with 54% of U.S. adults saying they plan to continue working past age 65, according to a report from the Transamerica Center for Retirement Studies.
Baby boomers, in particular, are most likely to delay retirement, with nearly 70% saying they don't intend to retire by age 65.
However, workers' decision to delay retirement may not necessarily be a choice. The median amount boomers have saved is just $152,000, the report revealed, which will likely only last a few years in retirement. That means many workers may not necessarily want to work longer, but feel they have to because they can't afford to retire.
What would it take, then, not only to retire at the traditional retirement age, but to retire early in your 50s? Early retirement is a dream that is shared by many but achieved by few, because it does require a significant amount of work. That said, retiring early at age 50 is doable -- if you're willing to work for it.
Step 1: Set a retirement goal
When you retire early, you'll need a heftier nest egg to last the rest of your life. You'll likely need to save hundreds of thousands of dollars more if you retire at age 50, than if you wait until your 60s or 70s to retire, assuming you live an average lifespan.
To figure out exactly how much you should save, first you'll need to create a retirement budget to estimate how much you'll be spending each year once you retire. Your spending levels in retirement may not fluctuate significantly from what you're spending now, but be sure to account for costs like travel and hobbies, which can be expensive in retirement.
Also, consider how you'll pay for healthcare in your early years of retirement. You won't be eligible to enroll in Medicare until age 65, so if you retire at 50, you'll need to find another source of health insurance for that 15-year gap. If your spouse is still working, you may be covered under his or her plan, but if not, you might need to buy individual coverage through the Affordable Care Act marketplace. These plans are often much more expensive than what you paid through your employer, so if you're not budgeting for this cost, it could take a big bite out of your savings.
Next, run your information through a retirement calculator to see how much you should save by retirement age. Don't be surprised if you discover that you need to save well over $1 million. Retirement is getting more expensive, particularly as seniors live longer lifespans. Combined with the fact that many workers no longer have pensions and you can't file for Social Security benefits until age 62 at the earliest, you'll need a lot of money in personal savings to live comfortably.
Step 2: Establish a savings plan
Once you know how much you should save by retirement age, you'll need to figure out how to scrounge together enough cash to achieve that goal. The earlier you retire, the more you'll need to save. You also have fewer years to save, which can make early retirement particularly challenging.
For example, say you have a goal of retiring at age 50 with $1.5 million. If you started saving at age 25, you'd need to save around $2,000 per month to reach that goal, assuming you're earning a 7% annual rate of return on your investments. But if you were to retire at age 65 with $1 million, you'd only need to save roughly $450 per month, all other factors remaining the same.
This doesn't necessarily mean you can't retire at 50, but it does mean you'll have to be willing to make some sacrifices. Comb through your budget and eliminate any unnecessary expenses, then reallocate that cash to your retirement fund. If that's not enough to meet your monthly savings target, you may need to take more drastic measures such as downsizing your home, moving to a more affordable city or neighborhood, or picking up a side hustle and investing all your earnings in your retirement fund.
As you're making these sacrifices, keep your end goal in mind. It won't be easy to slash your budget down to the bone, but if you've got your heart set on retiring early, it may be your only option. If you find that these sacrifices aren't worth it, though, you may consider delaying retirement by a few years so you can live more comfortably now.
Retiring early isn't easy, especially if you want to retire by age 50. It can be done, however, if you're willing to work hard and make sacrifices. By developing a goal and a saving strategy, you can build a healthy nest egg and enjoy an extra-long retirement.