Early retirement takes planning, but with the right goals and strategies, financial independence may be within reach for those who start now.

  • Set realistic retirement goals based on lifestyle, location, travel expectations, and spending plans.
  • It's essential to save a substantial portion of your income, make informed investments, and manage your debt effectively to achieve an early retirement.
  • You’ll need to create a sustainable retirement income, accounting for unexpected expenses like healthcare costs.
  • Plan for tax implications and penalties associated with early withdrawals from retirement accounts like IRAs.
  • You may want to routinely evaluate your retirement strategy to help you stay on the right track.

If you’ve ever taken an interest in retiring early, you’re not alone.

In fact, you’re like most Americans. According to the results of a 2024 study, 59% of Americans want to retire before age 65. However, only 40% believe they’ll be able to do so.[1]

While traditional retirement planning focuses on age milestones, early retirement demands a more intentional and strategic approach. If you’re motivated by the idea of retiring early, this guide provides all the information you need to get started.

Identify Your Financial Goals

The journey toward early retirement begins with setting precise and measurable goals. Rather than a vague wish to stop working “as soon as possible,” a clearly defined target helps you track progress and make informed choices.

Think realistically about your ideal retirement age, where you’d like to live, and the lifestyle you’ll want to have. Understanding these goals may help you determine what your yearly income should look like. Many financial advisors may recommend linking goals to actual numbers, such as annual spending needs.

Adopt the 4% Rule

If you want an easier way to decide your yearly income, you could try adopting “the 4% rule.”

The 4% rule is based on the idea that you should be able to live comfortably from 4% of your investments in your first year of retirement. Then, you should be able to increase or decrease that amount to account for inflation each year after the first.

For example, if you want to draw an annual income of $40,000 from your retirement investments in your first year, you’ll need $1 million set aside.

Visualize Your Retirement Lifestyle

Early retirement may look different for everyone. Consider these factors while estimating your required retirement assets:

  • Will you downsize to a minimalist lifestyle or maintain your current standard of living?
  • How will you cover essential costs, including housing, travel, health care, hobbies, and family support?
  • Will you be working part-time to supplement income during retirement years?
  • If you move to a new place, how will regional cost-of-living differences impact spending needs?
  • What are your main aspirations in retirement? Do you intend to travel, live simply, or make big purchases?

Answering these questions may help you understand your financial goals for retirement. Consider keeping a personal journal or creating a running list to help yourself keep track of your ideas.

Create a Savings and Investment Plan

Determining how much money you may need to retire early requires a significant amount of attention to detail. Take stock of current spending, identify expenses likely to rise or fall in retirement, and model your future needs.

Try using resources like the PNC Retirement Calculator to model various savings scenarios.

Strategies for Increasing Your Savings Rate

Retiring early typically requires you to be more disciplined than others about saving money. To retire ahead of schedule, focus on increasing your savings with these strategies:

  • Dedicate a higher percentage of income to savings, such as 30% or even 70%.
  • Boost income via career advancement, additional part-time work, or side businesses.
  • Reduce discretionary expenses, such as luxury spending, dining out, travel, or expensive hobbies.
  • Automate contributions to your retirement and investment accounts to build consistency.
  • Routinely review spending and identify new ways to save, even in small increments.

You could use all or some of these strategies to achieve your goals. According to a 2024 study of millennial Americans by the CFP Board, they are prioritizing savings accounts (57%), making sustainable financial choices (50%), holding as little debt as possible (50%), and owning a home (47%) to reach their goals.[2]

Notably, 41% also said they are planning on funding retirement accounts like employer-sponsored 401(k) plans and IRAs.

Investment Strategies for Early Retirement

Investing is key for early retirees, since they have less time to wait for simple savings accounts to compound interest. Many retirement plan options include annual contribution limits, so you should try to hit these limits every year:

  • 401(k)s (2025: $23,000 under age 50 or $30,000 over age 50)
  • Traditional IRAs (2025: $7,000 under age 50 or $8,000 over age 50)*
  • Roth IRAs (2025: $7,000 under age 50 or $8,000 over age 50)*

*Note that the annual contribution limits for IRAs are applied to the combined total of your Traditional and Roth IRA accounts. 

You may want to match your asset allocation strategy to your life stage and risk tolerance. Early retirees often start with more aggressive portfolios before shifting toward more stable holdings as their target date nears.

Manage Debt Before Early Retirement

Starting retirement with high-interest debt is risky and could undermine even the best-laid financial plans. Eliminate obligations like credit card balances and personal loans first. These typically carry much higher interest than what your investments will return.

Prioritizing debt repayment not only saves money over time but also reduces the stress of required monthly payments.

Budgeting for a Debt-Free Retirement

Financial advisors suggest most people work toward being debt-free (or as close to it as possible) by their retirement date. This may include making additional payments on your mortgage or vehicle loans, if possible.

Reducing fixed expenses in retirement increases your flexibility. If less of your annual income is already earmarked for expenses, your retirement plan may be less susceptible to unexpected costs or events.

Plan for Healthcare and Insurance Needs

Healthcare can sometimes be the single largest expense for early retirees. Medicare eligibility starts at age 65, so you’ll need to secure health coverage another way if you want to retire early.[3]

If you can’t get a healthcare plan through your spouse and you can’t qualify for an employer’s plan, you could consider a plan through your state’s Affordable Care Act (ACA) marketplace.

However, your out-of-pocket costs for these plans will vary by state and coverage level. If you have a moderate income, you may qualify for subsidies that help you pay your monthly premiums.

Preparing for Unexpected Medical Expenses

It’s usually prudent to expect at least some out-of-pocket healthcare costs due to unforeseen medical emergencies and long-term care needs. Consider setting aside extra funds to better manage these unpredictable expenses.

Health Savings Accounts (HSAs) are particularly valuable. With annual contribution limits of $4,300 for individuals and $8,550 for families in 2025, HSAs offer tax-free growth on savings used for qualified medical expenses.[4]

Funds in HSAs may also be used penalty-free for non-medical expenses after age 65, although they will be taxed as income.

Develop a Withdrawal and Income Strategy

To sustain your retirement, you’ll need to know how much you can withdraw each year without running out of money. The 4% rule might be a good starting point, but it may be too optimistic for early retirees.

Think about it this way: If you retire at 50, you may need your retirement assets to last 40 years or more.

Instead, you may want to set a withdrawal rate of around 3 to 3.5% to provide yourself with a greater margin of safety.

Creating Multiple Income Streams in Retirement

Many early retirees supplement their assets with multiple income streams. This may include freelance or part-time work, investment property income, business revenue, or investment dividends, but there are many other opportunities out there.

Diversifying your income not only stretches retirement savings, but it also provides a buffer if the market underperforms or unexpected expenses arise.

Tax Considerations for Early Withdrawals[5]

Keep in mind that withdrawals from certain accounts before age 59½ often incur a 10% penalty in addition to ordinary income taxes. By diversifying between Traditional IRAs, Roth IRAs, and taxable accounts, you can withdraw funds strategically. This may help in minimizing your overall tax liability.

For example, with a Roth IRA, you can withdraw the contributions you’ve made without any penalties, at any age. You’ll only be penalized if you withdraw earnings.

Get Started on Your Early Retirement Plan

Early retirement is an ambitious and worthy goal, but it is also a challenging one. It takes deliberate planning, disciplined saving and investing habits, and proactive financial and lifestyle management.

If you’re interested in pursuing early retirement, seek out trustworthy resources, and don’t hesitate to consult with financial professionals to get customized guidance about your retirement plan.