# Want to Retire by Age 50? Here's How Much You Need to Save

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KEY POINTS

• Using a target withdrawal rate of 4%, you can calculate how much you need to save by 50.
• A savings goal calculator can help you determine how much you need to save every month to reach your goal.
• The sooner you start saving for retirement, the easier it will be to reach your goal.

Can you really retire that early?

If you want to retire by age 50, you'll need to save quite a bit of money. How much exactly will depend on various factors, including your desired lifestyle in retirement and how much you've already saved. If you want to retire early, you will need to start saving early. So how much do you need?

## Calculate your desired retirement income

To get started, we first need to estimate how much money you think you will need in retirement. To get a good idea how much you need, look at your current spending. You can also list all your financial goals and create a budget. For example, if you want to travel more in retirement or buy a boat, add in those costs. Don’t forget to add the cost of healthcare and other expenses you may have to pay. The more precise you are, the better your estimate of how much you need will be.

Learn more: Best Budgeting Apps

## Calculate your desired savings goal

The next step is to calculate how much you would need at age 50 to be able to retire. A good starting point is using the 4% rule. Many retirees have relied on this rule to help determine how much they should spend in retirement. While this rule isn’t perfect, it is a good starting point to find a baseline number.

Here's how it works: You add up all of your investments and withdraw 4% of that total during your first year of retirement. In later years, you adjust how much you withdraw to account for inflation and how long you live. Here is the equation:

• Desired retirement income ÷ 4% = how much you need saved by 50

This rule works for any retirement age. Assuming you want \$50,000 a year in retirement, using the 4% rule, you would need \$1,250,000 by the time you are 50 years old.

• \$50,000 ÷ 4% = \$1,250,000

If you want to be more conservative, you can use 2% or even 3%. Here is how much you need:

• 3% = \$1,666,666
• 2% = \$2,500,000

## Calculate how much you need to save

Now that you know how much you need by age 50, the next step is to calculate how much you need to save right now. This math is a little more complicated since you have to account for compound interest. Luckily, there are plenty of calculators out there, like the Savings Goal Calculator from the U.S. Securities and Exchange Commission.

You first enter your desired final savings, your initial investment, the number of years you have until you hit 50, and the estimated interest rate. Using the desired savings goal of \$1,250,000, an initial investment of \$1,000, and a 10% annual interest rate compounded daily, here is how much you need to save per month, depending on when you start.

• Age 20: \$537.25 per month
• Age 25: \$922.78 per month
• Age 30: \$1,621.27 per month
• Age 35: \$2,981.91 per month
• Age 40: \$6,050.39 per month
• Age 45: \$16,038.84 per month

This may seem like a daunting task, but it is achievable if you start saving early and make wise investment choices. Of course, the sooner you start saving for retirement, the easier it will be to reach your goal. Play around with your numbers to see if you can invest more, push off retirement a couple of years, or reduce how much you need in retirement. Creating a financial plan can give you greater clarity and peace of mind on how much you need saved for retirement.

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