Retire at 50: The Surprisingly Simple Math Most Financial Advisors Won't Tell You

Dear Upwealth,

I'm 32, earning $85,000 annually, and dream of retiring by 50. I've been saving 15% of my income, but according to retirement calculators, I'll need to work until 65. Are early retirement dreams only for the wealthy?"

This question captures a common struggle I see among professionals. While traditional retirement advice focuses on complex formulas and huge target numbers, I've discovered something surprising: the math behind early retirement is much simpler than most people think.

The Simple Truth About Your Number Here's what most financial advisors won't tell you: your retirement number isn't based on your income—it's based on your expenses. This simple shift in thinking changes everything.

The foundation is the 4% rule, which suggests you can withdraw 4% of your retirement savings each year (adjusted for inflation) with a high probability of your money lasting 30+ years. This gives us a simple formula:

Your retirement number = Your annual expenses × 25

Let's make this real. If you spend $40,000 a year, you need $1 million to retire. If you spend $60,000, you need $1.5 million. It's that simple.

The Power of Your Savings Rate Here's where it gets interesting. Using realistic market returns of 5% after inflation, here's how long it takes to reach financial independence based on your savings rate:

• Save 50% of income → Retire in about 17 years

• Save 65% of income → Retire in about 10.5 years

• Save 75% of income → Retire in about 7.5 years

Using our reader's $85,000 income as an example:

• At 50% savings ($42,500/year saved, living on $42,500) → Need $1,062,500 to retire

• At 65% savings ($55,250/year saved, living on $29,750) → Need $743,750 to retire

• At 75% savings ($63,750/year saved, living on $21,250) → Need $531,250 to retire

The Real-World Implementation For our 32-year-old reader currently saving 15% ($12,750 annually), reaching retirement by 50 would require:

• Increasing savings rate to 35-40%

• Saving at least $29,750 annually

• Building a portfolio of about $1.2 million (adjusted for inflation)

Making It Work

1. Focus on the Gap: Instead of thinking about percentages, focus on your actual spending. If you're making $85,000 and spending $72,250 (85%), try keeping your spending at that level even when your income grows. When you get a raise to $90,000, that automatically increases your savings rate without requiring lifestyle cuts.

2. Build Safety Margins: Keep 2-3 years of expenses in cash to protect against market downturns, especially important for early retirees.

3. Consider a Bridge Strategy: Create a transition fund that allows you to shift to part-time work before full retirement, reducing the pressure on your portfolio.

The Bottom Line Early retirement isn't about hitting a huge number based on your income—it's about controlling your expenses and consistently investing the difference. The math is straightforward: save half your income, invest it wisely for about 17 years, and you'll have enough to support your current lifestyle indefinitely.

For our reader, moving from 15% to 35-40% savings would put early retirement at 50 within reach. It's not easy, but understanding the real math makes it clear that it's possible—regardless of your income level.

Remember: While the math is simple, achieving these savings rates requires commitment. Focus on gradually increasing your savings rate while investing consistently in low-cost index funds. Early retirement isn't just for the wealthy—it's for anyone willing to mind the gap between their income and expenses.