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Is $1 Million Enough to Retire Early?

Fact checked by John Rampton

John Rampton

John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due.... Read More

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retire early

It has become increasingly popular to plan for early retirement. Specifically among younger people. According to a CNBC Make It: Your Money survey in partnership with Momentive, nearly 30% of millennials and 25% of Gen Zers expect to need $1 million or more to retire comfortably.

Additionally, according to Fidelity Investments, retirement can last as long as 25 years.

Of course, meeting this financial goal when 55% of working Americans claim that they are behind on their retirement savings seems impossible. However, don’t get too frustrated if you believe that you’ll never be able to retire early. There’s no reason why you can’t retire at 50, 55, or 60 and have plenty of time left in life to enjoy new experiences. In order to succeed, though, you need to plan carefully and have a strong will.

1. Ask the same questions as your CFP® would.

As a CFP®, there are so many questions that I have before giving you the green light to retire early. These questions include:

  • Does your spouse have any retirement savings?
  • Do you have a pension?
  • What are your Social Security benefits going to look like?
  • Do you have any debt in retirement?
  • How much do you need to cover your expenses?
  • Do you know exactly how much you’ll need to live on per month?
  • What is your health like? Do you know the medical history of your family?

Why ask these questions? In my experience, I’ve seen people retire early when they’ve planned well ahead. All projections have been made. Sometimes things go wrong and there’s an emergency, whether it’s a medical one or repairing your car. As a result, they are forced to take money out of their retirement accounts.

Another problem? Underestimating retirement expenses. It’s not for the health stuff either. It’s for selfish reasons. In fairness, I don’t mean selfish in a negative way. You’re probably going to take your family on vacation, buy the latest iPhone, make home improvements, or go out to dinner.

You might burn through your retirement budget if you ignore any of these factors.

2. Work with a professional.

When it comes to meeting your financial goals, a good professional can make all the difference. In order to retire early, people must be able to save and invest properly, and most beneficiaries of proper guidance can greatly benefit from it. And, in particular, I’m talking about a CFP®.

You can start by visiting Click on find a CFP professional at the top and then enter your zip code to find a CFP professional near you. You can do this on your phone as well.

Keep in mind that you’ll have to meet certain minimums. You may not be able to work with some investment firms if you don’t have a million dollars, for example. So, I suggest picking two or three that seem to fit with your goals and seem to fit well with your style.

Ideally, you should work with a retirement planning specialist. Specifically, someone knowledgeable about income distribution. Their mission is to help you create a retirement income stream that will last for the rest of your life.

3. Use a retirement calculator.

To get an idea of how much you’ll need to save, invest, or diversify to have a steady retirement income, there are several online retirement calculators available. There are many free and easy-to-use calculators available online.

You just need to enter some basic information into the calculator. A few examples would be your annual income and the age at which you plan to retire. After you input these numbers, the calculator crunches them to provide you with a few suggestions about your retirement planning.

While a retirement savings calculator can help you estimate your retirement income needs, it often makes assumptions. It is hard to predict expenses, especially health care costs, and these calculators don’t account for retirees’ ability to adjust to changes in their lives. Rather than draining your savings to cover higher medical expenses one year, you may choose to make cuts elsewhere.

Likewise, the market is beyond your control. It’s impossible to predict what the stock market will do from year to year over a long enough period of time. And, equity returns are just guesses based on historical averages.

If you are not comfortable with retirement savings calculators, Vanguard provides a tool on its website that generates ranges of possible outcomes and probabilities based on your current retirement savings. By running multiple simulations of your inputs and measuring the frequency of each outcome, a Monte Carlo simulation approximates the probability of certain outcomes.

4. Start saving as early as possible.

In order to prepare for early retirement, you must also begin saving very early. If you get started sooner, you’ll have to put less effort into it.

As an example, let’s take a look at how it works.

Say you want to retire at 55 and need $1 million. It is estimated that you will earn $100,000 per year between now and retirement.

An average annual rate of return of 7% can be achieved by investing in a blended portfolio of stocks and bonds.

  • At 25 years old, you can save 11% of your salary and reach your goal.
  • If you are 30 years old, you will need to save 16% of your income.
  • You’ll have 20 years to save by the time you reach 35, and the rate will rise to 25% by then.
  • With 15 years to go, you will need to save 40% when you are 40.

You probably won’t be able to retire at 55 if you’re over 40 and starting from zero. It’d require you to save at least 100% of your income.

5. Put more money away than anyone else.

Typically, people believe that if they save 10% or 15% of their income, they can retire. If you plan to retire at 55 or even 60 and have 35 or 40 years to invest and save, that may be true.

Saving more money at 50 is necessary if you’re serious about retiring at 50. Your savings might be as much as 20% of your income, or maybe even 25% or 30%. If you intend to retire at 50, you will have to save 40% to 50% of your income if you are older than 25 or 30.

Saving 20% is a good place to start.

Instead of spending the extra money from every pay rise or promotion, put it into your savings. Eventually, you should be able to increase your savings rate to 30% or even higher after a few years of steady pay increases.

You accomplish two very important goals by saving such a large percentage of your income:

  • You can achieve your savings goals more quickly with this method.
  • Moreover, it teaches you how to survive on less than you make

When you retire, that second point will be extremely important. Retirement will be quicker and more effective if you have less money to live on now.

6. Cultivate multiple income streams.

Rather than relying only on your ability to build up a massive nest egg to get you to retirement, consider cultivating multiple income streams, suggests Miranda Marquit in an article for Good Financial Cents. You should instead plan to pay off your debt (including your mortgage) by the time you plan to retire early.

“Try to rid yourself of as many obligations as possible, so that you will have fewer expenses during retirement,” Miranda adds. As you prepare for the future, make a plan to pay off this debt. “Figure out how much money you will need each month to support your retirement lifestyle and then begin cultivating different income streams to create that income.”

“While there are rules that allow you to begin withdrawing from an IRA early, you likely won’t have access to Social Security benefits during an early retirement,” says Miranda. If necessary, consider early withdrawals from an IRA, but consider other sources of income as well, such as:

  • There are residual income opportunities associated with websites.
  • Royalties can be generated by books or educational content.
  • Start a business that will earn you money.
  • You might want to consider income investing.

“It is, of course, possible to cultivate a number of income streams at once, diversifying your income sources,” Miranda advises. “Start now to develop these streams so that they are established and mostly automatic by the time you are ready for early retirement.”

7. Aggressively invest.

It’s pretty much necessary to have a high-risk tolerance when saving for early retirement. If you invest in safe assets, such as certificates of deposit, you won’t reach your goal.

There may be some safe assets you can own, but the majority will need to be riskier investments. In addition to stocks, these include mutual funds and exchange-traded funds (ETFs).

Real estate investment trusts (REITS) may also be included since they often produce returns comparable to stock returns. Ultimately, you’ll have to invest heavily in assets carrying a high level of risk. This may result in a loss of some of your investment.

It is possible to lose money on a stock portfolio at any time. There is even a possibility that you might lose money for two or more years consecutively. That will require some preparation on your part.

In the long run, though, risk assets are a good investment.

A single investment can lose money in a given year, but multi-year investments provide the best returns.

The good news? The numbers work in your favor. Over the past 90 years, the stock market has returned an average of between 9% and 11%.

Do you really want to be aggressive? Invest everything in stocks. You should be able to earn around 10% per year over the course of 20 or 30 years.

If you prefer to play it a little safer, an allocation of 90% stocks will reduce your return to 9%, and an allocation of 80% will bring it to 8%.

The returns on either are, however, still solid. This is particularly true if you invest most of your money in tax-sheltered retirement accounts.

Again. aggressive investing comes with some risk. So you should choose a dependable investment platform. For those of you who are ready to retire early, here are my top picks:

  • Ally Invest. In addition to Ally Invest’s self-directed investing options, you can also use its robo-advisor to manage your account professionally. To begin with, Ally helps you identify your level of risk tolerance, where you can select “Aggressive growth” and invest primarily in stocks. Investing with Ally Invest is easy with low trading fees, 24/7 customer service, and professionally managed portfolios.
  • Betterment. With Betterment, investors have the option of using a robo-adviser to fully automate their investment processes. With RetireGuide, you can maximize your returns by harvesting tax losses and meet your retirement goals. To help you reach your goals, the service automatically rebalances your portfolio. There are no trade fees or annual management fees as well.
  • M1 Finance. The focus at M1 is on helping you reach your investment goals rather than assessing your risk tolerance. The M1 Finance investment “pie” is made up of 60 ETFs and stocks, and you can choose from 60 pie designs. M1 rebalances your account as necessary, managing your investments. Investing aggressively for early retirement is a great idea with M1, since it offers free trading and account management.

8. Make sure your retirement savings are maximized.

Early retirement planning is hampered by taxes, which are under-estimated obstacles. Taxes not only reduce your income but also decrease your investment returns.

Suppose you earn 10% on your investments, but your tax bracket is 30%, meaning you will only receive 7% in net returns. Consequently, you will have a slower capital accumulation rate.

It is possible, at least partially, to overcome that problem. Contribute as much as you can to your tax-sheltered retirement account.

By doing so, you’ll lower your taxable income from your job. In addition to protecting your investment earnings, you will also receive a 10% return on your portfolio.

The maximum contribution you are allowed to make to your 401(k) plan should be made by you if your employer offers one. A total of $22,500 would be available each year. You may be able to get a matching contribution from your employer.

Additionally, you should contribute to a traditional IRA, even if the contributions won’t be tax-deductible. If you set up a tax-deferred investment account, you can invest and accumulate profits tax-deferred.

In terms of early retirement, there’s a basic problem with retirement savings. When you withdraw from your retirement accounts before you’re 59 ½, you’ll be subject to both income taxes and capital gains taxes.

However, Roth IRAs can solve this problem.

9. Construct a Roth IRA Conversion “Ladder”

A Roth IRA doesn’t require you to contribute every year to get its benefits. You can convert other retirement accounts, like 401(k)s and traditional IRAs, to a Roth IRA. It’s another good reason to max out your retirement savings — especially if you’re planning on retiring before 60.

When you’re 59 1/2 and have been in the Roth IRA for at least five years, you can withdraw money tax-free from it. There’s also a provision for tax-free withdrawals before age 59 ½.

This is where Roth conversion ladders come in. You can convert money from an IRA, 401(k) or 403(b) into a Roth IRA.

Withdrawals are tax-free once they are made.

You can take withdrawals tax-free and penalty-free from Roth IRA contributions or conversion balances. They’re called Roth IRA withdrawal ordering rules.

According to those rules, Roth IRAs can only withdraw contributions or converted balances first. After those are taken, investment earnings can be withdrawn.

If you want to avoid the 10% penalty, you have to be in the Roth for at least five years. It’s here where the Roth conversion ladder comes in.

For early retirement, you can create a tax-free income source by making annual conversions starting five years before withdrawals are needed.

If you’re planning to retire early the strategy works great.

Because the ladder covers just five years until you can start taking regular withdrawals from your other retirement accounts penalty-free at age 59 ½. it’s perfect for early retirees.

10. Avoid additional debt.

If you do not manage your debt properly, it can undo all of your efforts to retire early. As an example, the fact that you have $500,000 in savings but $100,000 in debt of varying types will do you little good when you reach 50.

Additionally, debt comes with monthly payments that erode your net worth. At 50 you’ll want to retire with as few of those as possible.

Even better? Debt-free living should be the goal.

In order to be debt-free, you need to include your mortgage if you have or plan to have a mortgage. If you plan to retire early, you should include a sub-plan for paying off your mortgage before you do so.

11. Live beneath your means.

Living below your means is one financial habit you’ll need to develop. So if you make a dollar after taxes, you’d have to live on 70 cents and bank the remainder.

I know it’s difficult to get into that pattern if you’ve never done it before, but it’s vital. After all, early retirement will just be a pipe dream unless you master it.

You’ll need to adopt a few strategies to live within your means:

  • Try to spend as minimally as possible on your basic living expenses, mainly housing.
  • Consider driving an older, less expensive car instead of a new one.
  • When buying food, clothing, repairs, insurance, or anything else, be proactive about finding bargains and coupons.
  • You shouldn’t combine early retirement planning with the good life, especially when it comes to vacations and traveling.
  • Eat out rarely – it’s a surefire way to sabotage your long-term goals

Having extra money for savings is better than having it go to living expenses.

12. Don’t forget about the 72(t) rule.

When you take “Substantially Equal Periodic Payments” (SEPPs) from your qualified accounts (such as 401(k), IRA, Roth IRA, etc.) before age 59 ½, you are not subject to the 10% penalty rule. It’s also known as the “72(t) exception.”

To stay within SEPP rules, you can choose one of three different methods:

  • Compared to the other two methods, the required minimum distribution option generates a lower initial withdrawal.
  • The fixed annuitization method.
  • The fixed amortization method.

Based on your life expectancy and a permitted interest rate, the fixed amortization method determines your annual payment. The IRS recently made changes that have increased the amount that can be withheld without incurring the 10% penalty, so this calculation offers a significant increase.


Prior to the IRS’s changes, “reasonable interest rates” were calculated using low-interest rates tables published monthly. In December 2022, the rate was 1.52%. Now that the new ruling is in place, the floor rate is 5%. If one wishes to maximize the amount of money they can withdraw penalty-free each year before 5912, this offer is much more appealing.

If you decide how much money you want to withdraw, you have to stick with that method for five years or until you turn 5912. A one-time switch to the RMD method, usually resulting in a smaller payment, is the only exception. You might find this useful if you decide to go back to work and no longer wish to maximize your withdrawals.

Frequently Asked Questions About Early Retirement

Is my budget well-defined?

Instead of estimating your monthly expenses, it’s recommended that you calculate them. Consider this question: “Am I clear about how much money I need to live comfortably on? ”

Knowing how much money you’ll need for retirement can help you determine if your savings will last.

What impact will this have on my Social Security benefits?

As early as age 62, you can begin receiving Social Security retirement benefits, but your benefits could be reduced by up to 30 percent.

Depending on when you were born, you may be able to receive benefits before you reach full retirement age, which can range from 65 to 67.

What sources of retirement income will I have?

Working part-time and taking Social Security will reduce your benefits if you earn too much money. In addition, determine which retirement accounts you need to withdraw money from first in order to avoid tax penalties.

Do I still have health insurance?

Medicare kicks in at 65, so find out if your employer can provide health insurance during the interim, or if you’ll need private coverage.

Can I retire on $1 million?

Although it is possible to retire on a million dollars, it won’t be easy. In order to ensure that your savings don’t outlive you, you should carefully budget and invest your money. If you plan carefully, you can retire on $1 million comfortably. Despite this, if you do not take care of your finances in retirement, you may struggle.

Having a nest egg that size is necessary to retire with $1 million. To reach your savings goal, you will need to continue saving and working until you reach it. You can start planning your retirement once you have reached your goal.

When planning for retirement, there are a few things to keep in mind. The first thing you need to do is make sure you have enough money saved to cover your expenses. Living expenses, healthcare costs, and other retirement expenses all fall under this category.

Considering your income needs in retirement would also be helpful. Having enough income will allow you to cover your basic living expenses and still have a little left over to enjoy leisure activities and other pursuits.

Last but not least, consider how you may generate income after retirement. Consider part-time work or other income sources, such as pensions or investment earnings, if you need to continue working.

About Due’s Editorial Process

We uphold a strict editorial policy that focuses on factual accuracy, relevance, and impartiality. Our content, created by leading finance and industry experts, is reviewed by a team of seasoned editors to ensure compliance with the highest standards in reporting and publishing.

Wealth Expert at Due
Jeff Rose is an Iraqi Combat Veteran and founder of Good Financial Cents. He teaches people wealth hacking. He is a frequent on CNBC, Forbes, Nasdaq and many other publications. He is author of the book “Soldier of Finance: Take Charge of Your Money and Invest in your Future” where he teaches how he escaped from $20,000 in credit card debt to a life of wealth.

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