Personal Finance

We're in our 50s with a net worth of $5 million and we're not sure if we can retire yet or if we're just being overly cautious

Maurie Backman

Published: January 14, 2025 1:33 pm

Key Points from 24/7 Wall St.

• Retiring in your 50s means needing to stretch your savings longer and having to wait on Medicare.
• With careful planning, you can make a large nest egg last an extra decade.
• There may be a better option than retiring to look at, even if you can afford to do so.
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

No matter how much money you have saved as your retirement date approaches, you might worry about not having enough. Such is the situation this Reddit poster shared.

They have a nice amount of money — a $5 million net worth and a $4.4 net worth outside of their home equity. Of that $4.4 million, $4.2 is available for their retirement, with the remainder earmarked for college costs for their one child.

The couple is in their early 50s and wonders if they’re free to retire or if they need to keep saving. I think they’ll be fine if they retire right now, provided they manage their nest egg wisely. But I also think there are other avenues they could explore.

With enough money, early retirement is doable

There are certain risks of retiring in your 50s, as opposed to waiting until your 60s. First, you’re nowhere close to being able to collect Social Security, so you’ll need to live on your savings alone for a while.

You’re also potentially more than a decade away from being eligible for Medicare, which kicks in at 65. Between then and your retirement date, you’ll need to cover the cost of health insurance, which could be very pricey.

There’s also a greater risk of running out of money if your savings need to last for 40 year or so rather than 30-someodd years. But with a smart withdrawal strategy, I’m not too concerned with this couple running out of money when they have $4.2 million at their disposal. They could dump all of that into fairly safe investments, and at a 3% withdrawal rate, they’d have an annual income of about $125,000 just from their portfolio.

That may be doable for them since they say they live in a moderate cost of living area. Plus, if they’re retiring and their child is in college, they may have the option to move somewhere even cheaper.

There may be a better alternative to early retirement

Whenever I hear about someone wanting to retire in their 50s, I want to know why they’re in such a rush to bring their career to an end. In this case, the Reddit user says their job comes with manageable stress, but it also comes with a lot of travel that prevents them from maintaining their desired routine. So I can see why it would be tempting to retire early in that situation — constant travel can be draining.

What I’d suggest this person do before retiring in their early 50s, though, is see if there’s a different job situation they can get into that isn’t as disruptive to their life. They say they make $430,000 a year, which is a huge amount of money and a salary that could be tough to replicate.

But the thing is, they don’t need to replicate it. They could work part-time and make $50,000 a year, and that would give them a way to keep busy, earn a little money, and keep that much more of their nest egg untouched. Or, they could take a $140,000 full-time salary and perhaps leave their savings alone completely for another few years.

Also, working part-time, or taking on a less demanding full-time job, could mean continuing to get access to employer health insurance. That reduces what could otherwise be a huge expense.

Of course, on top of all of this, I’d suggest that this couple — and anyone else thinking of retiring early — sit down with a financial advisor to discuss their situation. A financial advisor may be able to help them get more comfortable with the idea of retiring in their early 50s. Or, an advisor might highlight some risks they didn’t think about, which is an important thing, too.

It’s often easier to scale back on work than to retire and then try to get back into the workforce. So it’s good to talk things through with a professional before making an official decision.