Here's How Many Americans Actually Retire Early

The dream of retiring early has been around for decades -- many of the ideas behind it come from the 1992 book Your Money or Your Life. In recent years, online communities have popularized what's now known as the FIRE movement, with FIRE being short for "financial independence, retire early." One financial independence subreddit currently has 2.2 million members.

It's understandable why the movement appeals to so many people. Being able to call it quits on a career at a young age gives you more time to enjoy life, without the daily grind of working for a living. But how many people actually make it happen? Here's the answer.

Only a small percentage of Americans retire early

Few Americans retire early, but the exact amount depends on your definition of early retirement. Here's the percentage of retired Americans in four age ranges, according to retirement data from 2016 to 2022 gathered by The Motley Fool:

• 40 to 44: 1%
• 45 to 49: 2%
• 50 to 54: 6%
• 55 to 59: 11%

So, if you count early retirement as retiring in your 30s or 40s, that's rare. Only 1% of Americans from 40 to 44 are retired, and only 2% of those from 45 to 49. We don't have data on how many people in their 30s are retired, but it's presumably far less than 1%.

If you want to retire in your 50s, that's more common, although still far from the norm. Even among Americans who are 55 to 59, only a few years away from claiming Social Security, about 9 out of 10 are still working.

Early retirement hasn't become more common, despite its increased popularity. In fact, it's less common than it used to be. From both 2002 to 2007 and 2008 to 2015, retirement rates were higher among people in their 40s and 50s.

What does it take to retire early?

Early retirement and traditional retirement have the same ultimate goal: Save enough money to last you the rest of your life. The difference is that early retirement involves doing it much sooner. For that reason, the FIRE movement is all about maximizing your savings rate -- the portion of your income you save and invest.

For most people, a savings rate of 15% to 20% is a smart goal. Early retirees typically save at least 25%, and often much more. Some manage to save 50% or more of what they make.

It's hard to reach and maintain these kinds of high savings rates. The people who do it usually either earn a large income, cut back heavily on spending, or both. You'll have a much easier time if you earn a high income. If not, you can still do it, but you'll need to be strict about how much you spend.

Save for retirement, but make sure to enjoy the present

Everyone needs to plan for retirement. If you'd like to retire earlier than most, then you'll need to save accordingly.

Be careful not to let goals of early retirement ruin your quality of life in the present. Some people practice extreme frugality, cutting practically everything they don't need to raise their savings rate. There are even those who live in vans so they can save on rent.

You don't need to cut spending relentlessly to save for retirement. There are other ways to speed up the process, including:

• Invest heavily in the stock market. Historically, the stock market has an average return of about 10% per year. Make sure to invest in stocks with most of your portfolio to maximize growth.
• Save through tax-advantaged retirement accounts. Anyone can open an individual retirement account (IRA), and you can deduct contributions from your taxable income. If you meet the income limits, you could also open a Roth IRA, which allows you to make tax-free withdrawals in retirement (but doesn't allow you to deduct contributions on your taxes).
• Make the most of your 401(k), if your employer offers one. Another popular way to save is a 401(k), a workplace retirement plan. Many employers will even match contributions up to a certain amount, so take full advantage if yours does.
• Increase your income every year. If you want to increase your savings rate, the best option is making more money. Negotiating a raise, finding a new job, and starting a side business are all options that can help you earn more.

There's nothing wrong with being careful about your spending, within reason. But it doesn't make sense to spend years suffering, just so you can retire as soon as possible. It's better to take a more balanced approach. Find a plan that works for your retirement timeline and allows you to enjoy life in the here and now.