The decision to retire early is a major one that requires careful consideration of your financial situation. While it may be possible to retire at 55 without claiming Social Security benefits, there are some key factors to weigh first.
What is the earliest you can claim Social Security?
Typically, the earliest you can claim Social Security retirement benefits is age 62. However, the benefit amount you receive will be permanently reduced compared to waiting until your full retirement age, which is currently 66 or 67 depending on your birth year.
If you claim benefits at 62, your monthly amount will be reduced by up to 30% compared to waiting until full retirement age. The reduction for claiming at 55 would be even greater.
What are the requirements for retiring at 55?
To comfortably retire by 55, you’ll need to have amassed substantial retirement savings. Without Social Security income, you’ll need enough in your retirement accounts, investment portfolios, or other assets to cover all your living expenses for potentially decades.
Financial advisors generally recommend a retirement savings target of at least 10-20 times your desired annual income in retirement. However, retiring at 55 requires even more diligent saving because you have fewer working years to build savings and more years in retirement to cover.
In addition, you’ll need extensive retirement planning to coordinate things like healthcare, taxes, and inflation. Retiring 30+ years before Medicare eligibility at 65 means figuring out how to cover health insurance premiums and out-of-pocket costs.
Should you wait to claim Social Security if possible?
Delaying Social Security benefits beyond age 62 results in a permanently higher monthly payment. Your benefit amount increases by about 8% per year up until age 70.
For example, by waiting until your full retirement age of 67, your benefit would be about 76% higher compared to taking benefits as early as possible at 62. That’s a significant boost that can really stretch your retirement income.
If you have enough savings to retire early at 55 without Social Security, delaying benefits as long as possible is usually wise. This allows you to maximize your monthly payments later when the income is likely more important.
What are some pros of retiring at 55 without Social Security?
- More years to enjoy retirement activities while still relatively young and healthy
- Potential to pursue passions and hobbies with less time restrictions
- Opportunity to travel more extensively if desired
- Lower lifetime tax bill if tapping retirement savings before Social Security payments begin
- Allows a spouse or partner to potentially claim spousal benefits later
What are some cons of retiring at 55 without Social Security?
- Higher income needs from savings to cover all living expenses
- Retirement funds may be depleted sooner without Social Security income
- No Medicare health coverage until 65, so high premiums for private insurance
- Possible changes negatively affecting retirement planning over a longer time horizon
- Potential for forced early withdrawal from accounts if savings aren’t sufficient
How much do you need to have saved by 55 to retire comfortably?
There’s no one-size-fits-all answer, as the amount needed depends greatly on your desired lifestyle and projected spending. However, most financial experts suggest targeting at least $1 million or more in retirement savings if retiring at 55 without Social Security.
Using the common guideline of withdrawing 4% annually from savings, $1 million would provide $40,000 pre-tax to live on each year. You’ll need to determine whether that projected income stream covers all your envisioned expenses.
To provide context, here’s how much experts often recommend having saved at 55 for more typical retirements:
- Fidelity Investments: At least 5 times your salary
- Suze Orman: Around $500,000 – $1 million
- JP Morgan Asset Management: 10 times your final pre-retirement income
So targeting well over $1 million and even up to $2-3 million or more is wise if you hope to retire at 55 without Social Security benefits to rely on.
How can you amass enough to retire by 55?
Saving $1 million or more by age 55 is extremely challenging but can be achieved through determination, discipline, and diligent investing. Here are some tips:
- Start saving for retirement in your 20s and save 15% or more of your income
- Take full advantage of 401(k) and IRA investment accounts
- Limit your living expenses and discretionary spending
- Invest early and aggressively for growth and compound returns
- Supplement savings with inheritance, business income or real estate
- Consider moving to a low cost-of-living area before retirement
Maximizing your savings rate early in your career is vital. If you start saving $10,000 annually at 25 and earn a 7% average return, you would have over $1 million by 55 with no additional contributions. Time and compounding are powerful.
What are ways to make your savings last without Social Security?
Making your retirement savings endure for 30 years or more without Social Security requires smart planning both before and during retirement. Strategies to make savings last include:
- Opt for lower-risk investments as retirement nears
- Minimize taxes by utilizing retirement accounts strategically
- Have a flexible withdrawal strategy adjusting for market returns
- Supplement savings with income from part-time work
- Maintain a moderate, sustainable withdrawal rate like 4-5%
- Keep living expenses low and well under budget
- Consider relocating to a lower cost area for retirement
- Delay withdrawals by cutting expenses or using home equity
Generating any additional income streams you can in retirement will help ease withdrawals from finite savings. Even earning a few thousand dollars annually from work or hobbies can really stretch your portfolio.
What other creative ways are there to claim Social Security early?
While you can’t claim retirement benefits from your own record until at least age 62, there are some creative workarounds to potentially access Social Security earlier than that in your 50s.
Some options if eligible based on spousal or ex-spousal work records include:
- Spousal benefits – Claim up to 50% of spouse’s benefit at full retirement age
- Divorced spousal benefits – Claim up to 50% of ex-spouse’s benefit at 62 or later
- Survivor’s benefits – Claim up to 100% of deceased spouse’s benefit at 60 or later
These allow you to collect benefits tied to your spouse or former spouse’s work record before normal retirement age. The specific amounts and eligibility rules can be complex, so consult with a Social Security expert.
Is retiring at 55 without Social Security the right decision?
Retiring decades before normal retirement age is extremely ambitious and requires diligent preparation. While the freedom and flexibility of early retirement may sound enticing, you need to objectively weigh:
- Your satisfaction with a potential career exit in your 50s
- Ability to cover healthcare costs until Medicare eligibility
- Capacity to build sufficient retirement savings
- Confidence your savings can support you for the long-term
- Steps you can take to generate supplemental income
- How to plan for and hedge risks over a 30+ year time horizon
- Creative options to utilize Social Security benefits through a spouse
Retiring at 55 without Social Security requires strong savings habits starting early in your career along with smart planning. While difficult, many have achieved the goal with determination. But it’s not for everyone, so carefully consider if it aligns with your situation.
Conclusion
Retiring comfortably at 55 without relying on Social Security requires diligent preparation. You’ll need substantial retirement savings to live on, likely at least $1 million or more. To amass that sum by 55 demands aggressively saving and investing starting early in your career. Creative use of spousal or survivor benefits can provide some Social Security income. If you’re willing to make sacrifices, retiring decades before normal retirement age is achievable for some but requires meticulous financial planning.