How Much Does a Married Couple Need To Retire at 55?
Every retired couple has dreams. Whether it's to travel the world or stay home and watch your grandchildren grow, your goals take money.
So, how much does a married couple need to retire at 55? If you're striving to achieve financial independence and retire early status (FIRE), there are some important things you must know.
First, how much each couple needs to retire at 55 depends on where they live, their lifestyle, overall health, types of income, and the amount of debt they have.
In general, Fidelity suggests that to retire at 55, you should have 7x your income saved, but that's if you plan to continue working through the typical retirement age. If you retire early, you'll need more money saved because you'll have more years to cover without dual income.
Importance of Financial Preparation for Early Retirement
Retiring before the typical retirement age requires more planning than retiring at a typical age.
That's because you cut yourself short of income-earning years, so you need to save for retirement now, usually in much larger amounts than you would if you planned to work until age 65 or later.
Planning for early retirement means considering the following:
Are your debts paid off, or will you still have bills like a mortgage or credit card debt?
Will both partners retire simultaneously, or will one spouse contribute to the household income?
Will you have health insurance, or must you pay out-of-pocket for your policy?
Do you have a solid investment strategy that allows you to leave your retirement savings untouched?
If you wait until retirement age, you have other protections, such as Social Security benefits and Medicare. Retiring early means you must figure out how to live without these benefits for the time being, which can increase your expenses.
Assessing Your Retirement Income Needs
Regardless of your retirement age, you should consider your retirement income needs. It's important to look at the big picture, especially if you'll dig into your retirement account before the traditional retirement age to ensure you have all your bases covered.
When evaluating where your retirement income will come from, consider these accounts:
All 401Ks from current and past employers
Any IRAs you opened and managed
Taxable investment accounts
Savings
Physical assets you own that you can sell
It's important not to consider Social Security benefits since you should hold off as long as possible before accessing them.
The longer you delay taking benefits, the higher the monthly benefit you'll receive, which can come in handy when you're in your 70s and have Social Security income to supplement your retirement savings.
Factors To Consider When Planning To Retire at 55
While there are factors you must consider no matter the age you retire, here are some top factors if you plan to retire at 55.
Current Lifestyle
Think about how drastically (or not) you'll change your lifestyle. Without your current household income, what will you and your spouse do with your days? Do you dream of weeks spent traveling, or are you more of a homebody? Will you keep up your current activities or take on new ones?
While retirement is largely about money, you should also consider your mental and emotional well-being. Careful planning is the key to a happy and healthy retirement, as well as to ensuring you have enough money to meet your retirement needs.
Healthcare Cost
Healthcare is one of the largest expenses you'll incur in retirement. Maybe not when you first retire at 55, but as you age and your health problems become more frequent or severe, your healthcare costs will increase.
When you retire before 65, you must find your own health insurance unless your spouse continues to work to keep the benefits. If you must pay for your own insurance, consider the cost of the premiums and the plan's deductible, co-insurance, and any out-of-pocket costs.
Inflation
The inflation rate affects how much your retirement savings will cover in future years. It's impossible to predict the inflation rate, but a reputable financial professional can help you plan best for the unexpected.
As you save for retirement, consider diversifying your portfolio to offset large losses or significant market swings, including higher inflation rates. This will ensure you have the maximum amount of money saved to reach your financial goals in retirement.
Retirement Activities
Chances are you aren't planning to sit around and do nothing if you retire early. You likely have big plans, and plans usually cost money.
Think about what you plan to do in your retirement years to keep yourself and your spouse occupied because it's a big change going from working full-time to not at all.
Your retirement activities may include hobbies, traveling, and even working to make extra money, which isn't a bad idea when you retire early. The longer you can put off taking from your retirement savings, the more money you'll have when you truly no longer want to work.
Social Security Benefits
You cannot collect Social Security benefits until age 62, even though that is considered early.
You're better off waiting until full retirement age, which for most is 67, to get maximum benefits. Without Social Security income to rely on, you must create another financial plan that will allow you to live the life you want without relying on SSI.
How Much Does a Married Couple Really Need To Retire at 55?
So, how much does a married couple really need to retire at 55? Here's what to consider.
Estimating Retirement Expense
Start by writing down all your retirement expenses. Here's a list to get you started, but don't forget any expenses that are unique to you:
Housing: Mortgage, utilities, home insurance, property taxes, house repairs and upgrades
Healthcare: Health insurance, out-of-pocket medical costs
Savings: Emergency fund and money to live on without digging into retirement savings
Travel: Vacations, trips to see family
Hobbies: Groups, activities, and anything else you'll do to keep busy
Calculating How Much You Need To Save
How much you need to save depends greatly on your expenses. Do your best to estimate your expenses and leave wiggle room in each one. Don't forget about emergencies, unexpected opportunities, or whether you'll continue to work part-time or look for passive income opportunities.
Remember that when you retire early, you have more years of expenses to cover without household income. Err on the side of caution to ensure you have enough income.
Income Sources in Retirement
When thinking of your income sources in retirement, you likely think of the typical 401K, IRA, and regular savings, but there are other avenues to tap into, including:
Taxable investment accounts
Home equity
Short-term cash investments
Social Security (when you reach retirement age)
Bonds
Strategies To Reach Retirement Goals by 55
Reaching your retirement goal of retiring at 55 takes careful planning. Here are some strategies to help you reach your goals.
Start Saving Early
The earlier you save, the more money you'll have available because your money has more time to grow.
It's best to start saving for retirement as soon as you start working full-time as an adult, but it's also never too late to start. The earlier you save, the less you have to contribute at one time because of the compounding interest, but of course, the more you save, the better.
Maximize Retirement Accounts
Take advantage of your tax-advantaged accounts and contribute the maximum amount each year. In 2024, you can contribute $23,000 to your 401K and $7,000 to your IRA. You can also take advantage of catch-up contributions if you are over age 50.
Debt Reduction
If you want to retire early, keep your debt to a minimum. Before saving, pay off any high-interest debt, such as credit cards, auto loans, and even your mortgage. The fewer bills you have in retirement, the easier it is to enjoy your golden years without stress.
Budgeting and Financial Planning
Budgeting and financial planning are the keys to successfully retiring early. Working with a financial advisor can help you explore your options and learn how to maximize your savings plan so you can retire early.
Ready To Plan for a Comfortable Retirement Together?
Planning for retirement requires patience, time, and dedication to your goal.
Whether you will work part-time to earn additional income or not work at all, there are key things you must consider to ensure you have what it takes to retire at 55.
Contact me today to schedule your complimentary consultation to see where you stand on your goal to retire early.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
