Most people retire around age 62, and most retirement advice is geared toward those who retire well after age 55. So if you’re retiring at 55, you need to be especially careful about typical rules and strategies—because they might not apply to you.
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For instance, getting health coverage could be a challenge after you leave your job. But you might have several options, and some tax strategies might help you save money on premiums.
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There’s also the question of where to get money from before age 59.5. Retirement accounts typically have early withdrawal penalties, but the tax code offers several ways to get money out early. We’ll review those here.
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Not many retirement calculators accommodate this strategy, whether you’re retiring early or delaying Social Security with a bridging strategy. Calculators often assume that you’ll start getting pension or Social Security income immediately at retirement, but if you leave work at 55, things may look different for you.
Fortunately, there are several tools available to help you run the numbers. I obviously do this with clients, but if you want to DIY, you can try calculators that range from simple to complicated.
Some calculators and resources for early retirement planning:
– New Retirement (paid and free versions):
– Schwab calculator:
– FI Calc:
– Health insurance tax credit calculator:
– Read the article here:
Use all of the above at your own risk. Read the assumptions and privacy policies carefully, and compare results among various tools. Disclosure: I am able to manage client accounts at Charles Schwab, but I receive no compensation or other benefits for including their calculator here. I am not affiliated with the calculators above at the time of publishing, and I don’t expect to be.
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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states. Flat-fee and one-time planning options are available.
CHAPTERS:
00:00 Retiring at 55 Is Different
00:34 Why 55?
01:20 Health Insurance
06:06 Access to Funds Without Penalty
11:06 Shouldn’t I Minimize Taxes?
12:54 Do I Have Enough to Retire Early?
13:19 Example of Retirement at 55
16:12 Tips for Planning and Calculating
IMPORTANT:
It’s impossible to cover everything you need to know in a video like this. The only thing that’s certain is that you need more information than this. Retiring early brings additional risk as you have additional years of funding and fewer years of working. Plus, more time means more uncertainty. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration….(read more)
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My understanding is ACA is based off your last W2 and with that being said, if my last year before retirement I make say $150k then I'm going to pay through the nose for insurance but after that first year, my next W2 is going to be significantly smaller and that's when the ACA really makes sense. Please correct me if I'm wrong on that.
Have you looked at the cost of cobra?
How is that a realistic option?
Why is that so high on your list?
Thank you for your helpful advice! I'm financially independent and building a solid retirement plan. It takes positivity and consistency to learn new things and unlearn old habits. It is critical to have a mentor or coach to guide you through the process. It's also advantageous to begin at a young age!
Good video, your voice and the way you talk reminds me so much of half life. The guy in the suite.
Great video!! We used the same software. we are retiring July 2023, under the rule of 55. Would have been much harder to figure out w/o the software.
thank you! This is great!
Excellent content, Justin. Thank you!