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How Much Do I Need to Retire at 45?

Retirement Planning
Young adults enjoying a vacation wonder, "How much do I need to retire at 45?"

Key Takeaways

  • To retire early, the general rule of thumb suggests withdrawing no more than 4% of savings in the first year, adjusting for inflation thereafter, but a slightly smaller withdrawal rate might be prudent for a prolonged retirement.
  • Calculating the amount needed for retirement involves determining expected annual expenses, including healthcare costs, and factoring in inflation.
  • Using the 4% withdrawal rule, you would need 25 times your annual expenses to avoid over-withdrawing your accounts over time, not considering market volatility, inflation, taxes, or fees.
  • Early retirement demands aggressive saving, and reaching the savings goal may require significant penny-pinching and robust retirement contributions.
  • Many factors can influence retirement projections, such as additional sources of income, health conditions, willingness to work part-time, and assumptions about the market's future performance.

Looking to spend your days playing golf or tending the garden while most people your age are still decades away from retirement? If that picture sounds like your dream life, you're not alone.

Retiring well ahead of the norm is a topic that dominates online forums and many millennial-managed websites. But figuring out how to retire at 45 — and reaching that goal — isn't for the faint of heart.

A typical adult in good health may go on to live more than three decades after they've reached their mid-40s, and quite a few will reach age 85 or 90.1 Needless to say, if you're looking to leave the workforce early, you'll likely need a robust investment account to avoid running out of money during your lifetime.

Understanding What It Takes to Retire Early

The general rule of thumb in retirement is to withdraw no more than 4% of your savings in the first year, and then adjust your income for inflation after that. But those planning a prolonged retirement may want to err on the cautious side with a slightly smaller withdrawal rate.

To figure out the amount of savings you'd need at retirement, you'll need to determine your expected annual expenses in retirement. That can be daunting for someone who's still relatively young, but a retirement calculator can help you tally your projected living costs, including housing expenses, food, utilities, loan payments and hobbies.

One of the expense categories you'll certainly want to account for are health care expenses, which will likely represent one of your biggest costs even in your late 40s or early 50s. In the near term, that includes things such as health care insurance premiums and out-of-pocket costs, such as deductibles and coinsurance. You may also have to shop for health insurance plans on an exchange since most people aren't eligible for Medicare until 65.

Long-term medical costs are another factor to consider. You may need to hire a caregiver or enter an assisted living facility later in life. The average cost of a home health aide is currently about $27 an hour.2 Meanwhile, care at a nursing facility is even pricier, with a private room averaging $9,034 per month.3 If you plan to eventually take out long-term care insurance to help cover those contingencies, you'll want to factor that into your living expenses and account for inflation.

Estimating Your Savings Goal

Suppose you add up your potential expenses and figure you can live off $50,000 a year from your investments in your first year of retirement. (Our Retirement Cost of Living Calculator can help you do the math.) If you use the 4% withdrawal rule, you'll need 25 times your annual expenditures to avoid over-withdrawing your accounts over time, although this does not take into consideration market volatility, inflation or any taxes and fees on the account.

So, even with that modest budget, you'd have to save a hefty $1.25 million to stay afloat. As you typically can't pull money out of a 401(k) until you reach age 59½ without incurring penalties, saving aggressively is a necessity.

Regardless of your projected retirement budget, you'll want to calculate the necessary amount of funds you'll need using the withdrawal rate with which you're comfortable.

Making Early Retirement Work

Obviously, any illustration like the one above is only intended to give you a ballpark idea of what you would need saved in your retirement account. There are any number of factors that may alter your projections, including:

  • Other sources of income in retirement, including a spouse's wages or a pension
  • Your health condition and expected lifespan
  • Your willingness to supplement investment income with part-time work
  • Your assumptions about the market's future performance

So, if you're still wondering how to retire at 45, you'll want to take all of those variables into account. Discussing the implications with a financial professional could potentially give you a little extra reassurance before taking the plunge.

For those who aren't extremely high income-earners, reaching your savings goal by that age likely requires severe penny-pinching early in your career, matched with extremely robust retirement contributions. It may not be easy, but it isn't impossible.


  1. Ageing and health. https://www.who.int/news-room/fact-sheets/detail/ageing-and-health.
  2. Senior In-Home Care Costs. https://www.seniorliving.org/home-care/costs/.
  3. How to Pay for Nursing Home Costs. https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.