This article is reprinted by permission from NerdWallet. An online search for “early retirement” will yield millions of results, many of those about retirees who saved aggressively and exited the workforce before age 40.
But most people have a more approachable target in mind: According to a new NerdWallet survey, Americans who aren’t yet retired but plan to retire say they plan to leave full-time work at age 57, on average. That still qualifies as early — it’s a decade before the full Social Security retirement age of 67 — but it’s achievable without making punishing cuts to your budget. Here are five steps you can take to hand in your notice 10 years early. See: Lawmakers consider plan to raise Social Security’s full retirement age to 70How to retire 10 years early1. Save more The earlier you want to retire, the more you need to save. For traditional retirement, experts generally recommend saving 10% to 15% of your pre-tax earnings. For example, let’s say you’re 22 and you make $40,000 a year. If you save 10% of your income, get a 6% average annual return on your investments and want to retire at age 67, you could leave the workforce with around $1.13 million. That’s likely enough, assuming you spend 70% of your pre-retirement income annually in retirement and have a life expectancy of 85. (All of this is according to NerdWallet’s retirement calculator, which assumes 2% salary increases per year, 3% annual inflation and a 5% investment return once retired.) But let’s say you want to leave work at age 57. With all the same assumptions in place, you’d only have around $570,000 when you retire, which isn’t enough to cover your expenses without drastically reducing your lifestyle during those later years. According to the calculator, to have enough to retire at 57, you’d need to save more than double — roughly 22% of your pre-tax income each year. That’s a significant difference, but if you plan on retiring early, spending less and saving earlier in your career is especially critical because it gives your money more time to grow. Also read: Many retirees can’t wait until 70 to collect Social Security benefits, but they could if they use …