How Early Can a Person Consider Retirement?

I hate when people respond to a question with a question, but my answer for how early can a person consider retirement? Is how much can a person save before hand?

There is no straight forward answer to these questions because every situation is so unique. There are a number of factors that contribute to this answer. For instance, how much you save each year, how your investments do, what it is you want to do in retirement/how much money you'll need each year, and how long you'll be in retirement. This is a lot to take into consideration.

Since the question mentions it we'll start by looking at how long you'll be in retirement. Unless you have a medical condition that already tells you otherwise, you'll need to budget for a long life. Plan on living to be 95, although if you want to play it safer it's not a bad idea to budget for 100 years of age.

The odds of living that long are against you, and it's not fun saving more than you'll need, but it's worse to have run out of money at 90 years old--it's not like you're likely to pick up a new career when you're 85. So, with that in mind, say you retire at 55 years old. You cannot start taking withdrawals from your 401k until you reach 59 years and 6 months of age (and the earliest for social security is 62) so you'll need to have some liquid assets saved for the mean time. If you're going to retire that early you'd need to have planned a budget for 40 (or 45) years.

To decide if this is feasible you'll need to figure out how much income you'll need each year in retirement. Consider a lot of factors here--what things you'll want to do in retirement and how much they'll cost, food, a mortgage payment if you won't have paid off your home loan by then. Once you have this number in today's money make sure to take inflation into account, and then multiply this number by the number of years you'll need to live on this money.

This simple math will tell you how soon you can really afford to quit your job, and thus, how early a person can consider retirement. Even though this may seem like a long ways away, to make it all possible, you'll need to make sure you do think about this often, check on your investments, and keep thinking about the future so that when the day finally does come you'll be ready.