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You’ve hit your late 50s, and have about a million in your 401(k). With only a few years left until you hit retirement, cashing out of the working world early might seem like a good idea.
But how do you know when it’s enough? Let’s run through a scenario to see what it takes.
Consider Diane, who’s worked at the same company her entire career. But after a recent shakeup in the leadership team, she now finds herself constantly micromanaged and is looking for an exit.
With $930,000 saved in her 401(k), she’s wondering: Is she ready to retire today — and save herself from more passive-aggressive conversations with her new boss? The other option would be company hopping, but re-entering the job market at 59 doesn’t sound appealing either.
The promising news is that she may be able to retire today. However, she’s got enough life experience to know there’s always a bit more nuance than that.
Retiring earlier means Diane will need to wait several years before she can start claiming Social Security benefits and be eligible for Medicare. And it means needing a solid plan for her retirement expenses, health care and even taxes.
If you find yourself in Diane’s place, but haven’t worked out the math yet, you may want to pause a bit and take another look at the numbers before taking early retirement.
Here’s what to consider before handing in your notice.
Deciding if it’s possible for you to retire will depend on whether you have a clear idea of how you’ll cover your expenses when you stop working.
For example, since Diane can’t claim Social Security benefits yet, the $930,000 in her 401(k) needs to be truly enough to cover all of her expenses until she can claim them. Otherwise, she’s going to drain her retirement savings.
To avoid this problem, many retirees use a common retirement budgeting tactic — the 4% rule — to ensure there’s enough money from their retirement accounts when making withdrawals, even when adjusted for inflation.
With $930,000 in her 401(k), Diane could withdraw $37,200 each year before taxes. The problem is, she will have to live off that alone until she can start claiming Social Security benefits.
There’s also the question of whether $930K is really enough. After all, the average American thinks they’ll need $1.26 million to retire, according to a study by Northwestern Mutual (1)
Since the earliest Diane can claim Social Security is at age 62, that means she has to take care of herself for at least three years. Plus, it’s worth remembering that if she does decide to take Social Security benefits that early, they could be permanently reduced by up to 30% (2).
On top of that, once she leaves her job, she’ll lose her employer-sponsored health insurance — and she won’t qualify for Medicare until 65, as she has no other ailments (3). That means she’ll need to secure private coverage or roll the dice and risk going uninsured.
The more Diane looks into it, the more complicated it gets. She’s terrified she’s going to shoot herself in the foot, financially speaking, by retiring early.
If you are burdened by similar worries, a financial advisor might be your way out.
With the help of a financial advisor, you can start crunching the numbers and build a retirement plan that works for you.
In fact, according to Vanguard research, people who consult with financial advisors see a 3% increase in returns compared to those who don’t (4). In a separate study, Envestnet found that a good financial advisor can deliver a 3% boost by improving financial planning, asset allocation, investment selection, systematic rebalancing and tax management (5).
That difference can become substantial. For example, if you started with a $50,000 portfolio, professional guidance could mean more than $1.3 million in additional growth over 30 years, depending on market conditions and your investment strategy.
But hiring an advisor can be a lifelong commitment, which might make or break your retirement. That’s why finding reliable advisors is crucial.
Finding the right advisor has been made simple now with Advisor.com. Their platform combs through its database of thousands of advisors to connect you with a licensed financial professional in your area who can provide personalized guidance for your retirement.
Once you are shown your match, you can read through their profile and client reviews and even set up a free introductory call with your potential advisor — with no obligation to hire.
Another option, but one reserved for those with a high net worth or income well over six figures, would be to work with the white-glove financial experts at Range, a CFP-backed platform.
For wealthy retirees, key services would include minimizing tax exposure, growing their portfolio and optimizing their investment strategies. Even better, unlike many other white-glove advisorial services, Range offers flat-fee pricing and 0% AUM fees. By comparison, traditional advisors typically charge 0.5% to 2% AUM fees.
Range also offers wills, trusts and estate planning through partner services as a one stop shop for your full financial life.
By now, you’ve looked at your retirement savings, or maybe even spoken to a financial advisor, and know how much will be there in retirement. But how much will you spend?
Here’s where getting crystal clear comes in handy: If you’re unclear about not only your income but also your expenses — both now and years in the future — you could be at risk of running out of money.
That’s why evaluating your expenses plays a huge role in retirement planning, especially if you have high debt. And even if you have money owing, it can still be possible to make it work.
You just might have to get creative with planning your expenses.
If you’re looking for places to start, a detailed budget can show you exactly where your money goes each month. By tracking your spending now, you can better gauge whether your savings and future income will realistically support an early retirement.
A quick daily check-in of your accounts can show you exactly where your money is going.
An app like Rocket Money can easily flag recurring subscriptions, upcoming bills and unusual charges by pulling in transactions from all your linked accounts.
This can help you cut unnecessary costs, and then you can manually redirect savings straight into your retirement fund. No spreadsheets, no guesswork, no stress. Small habits like this can make a big difference over time.
Rocket Money’s intuitive app offers a variety of free and premium tools. Free features include subscription tracking, bill reminders and budgeting basics, while premium features — like automated savings, net worth tracking, customizable dashboards, and more — make it easier to stay on top of your retirement contributions and overall financial goals.
Once you know what you’re spending your money on, you might find that you’ll have to cut down on your expenses.
After all, even one financial misstep can make your retirement savings feel less substantial once you’re living on withdrawals instead of a paycheck — especially when your nest egg needs to last for decades.
That’s why some retirees — or those who want to be one — turn to senior-focused organizations like AARP, which offers discounts on everything from prescriptions and dental coverage to travel, entertainment and insurance.
As one of the most trusted organizations for older Americans, AARP not only offers money-saving perks, but they can also help you make informed financial and health decisions.
AARP members get access to guides that can help you make the most of Social Security, choose the right Medicare plan and uncover other government benefits — potentially saving you thousands.
Now that you know how much you’ve got and how much you’ll spend, you might start thinking of alternative options to bring in some income during your golden years.
For example, instead of leaving your career entirely, see if you can work part-time hours or freelance for your current employer. That way, you can free up some time to pursue your ideal retirement lifestyle while earning income.
Side hustles or gig work is another way to fill in any income gaps. After all, your skills may easily lend themselves to a side business idea.
If you still want to retire completely, though, it could be a good idea to try to build a passive income source to ensure you can cover any shortfall. Passive sources of income are a great way to give you both financial security and peace of mind.
If you are on the hunt for sources of passive income, real estate has long been a popular option — but buying a property outright and becoming a landlord can require significant capital and energy.
However, you don’t have to become a landlord anymore to receive monthly income from your investment properties.
Backed by world-class investors like Jeff Bezos, Arrived lets you invest in shares of vacation homes and rental homes across the country.
One way to boost your portfolio’s diversification is by investing in alternative assets, such as real estate. However, finding and sourcing properties yourself can be cumbersome, costly and admin-heavy.
But there are plenty of real estate investment opportunities out there, so long as you know where to look.
For instance, you could leverage multifamily real estate investing. In a report prepared by JPMorgan, Al Brooks — the firm’s vice chair of Commercial Banking — said, “I think multifamily housing is absolutely where you want to be as an investor (6).”
He added, “The multifamily rental market may still feel the impact of a recession, but to a lesser degree than other asset classes.”
If diversifying into multifamily rentals appeals to you, you could consider investing with Lightstone DIRECT, a new investing platform from the Lightstone Group, one of the largest private real estate companies in the country with over 25,000 multifamily units in its portfolio.
Since they eliminate intermediaries — brokers and crowdfunding middlemen — accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This streamlined model can help reduce fees while enhancing transparency and control.
And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone — a true partner — as Lightstone puts at least 20% of its own capital into every offering. All of Lightstone’s investment opportunities undergo a rigorous, multi-stage review before being approved by Lightstone’s Principals, including Founder David Lichtenstein.
How it works is simple: Just sign up with your email, and you can schedule a call with a capital formation expert to assess your investment opportunities. From here, all you have to do is verify your details to begin investing.
Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns across market cycles with a 27.6% historical net IRR and 2.54x historical net equity multiple on realized investments since 2004. All told, Lightstone has $12 billion in assets under management — including in industrial and commercial real estate.
As such, even if multifamily rentals don’t appeal to you, Lightstone could still serve you well as an investment vehicle for other real estate verticals.
