A common question we hear from clients is, “How much do I have to save if I want to retire early?” The right answer depends on your target retirement age and lifestyle. Someone who wants to sail around the world on a yacht will have a different savings goal than someone who dreams of writing children’s books in a cottage by the sea.
What most people are really asking is, “How can I achieve financial independence?” They want to leave their high-pressure job while their health is still good, but still live comfortably.
Whether your goal is to retire by 55 or even sooner, there are several steps you can take to accelerate your journey to financial independence.
Time is one of your most valuable assets. The sooner you can start putting money away, the more your savings will benefit from compound interest.
As the chart below illustrates, delaying retirement savings by 10 years can reduce future portfolio value by more than 50%.
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SOURCE: JPMorgan Guide to Retirement 2026
* (based on an average 7%* annualized return). The S&P’s average, annualized return has been 9% over the past 30 years (6.3% when adjusted for inflation). Past performance does not guarantee future results.
If you want to retire early, it’s important to invest consistently. Don’t try to time the market. A 2026 report from Fidelity revealed most "401(k) millionaires" crossed the seven-figure mark through decades of steady contributions rather than extraordinary investment returns.
If you dream of escaping the corporate grind to travel the world or pursue your true calling, maxing out your employer’s 401(k) match (if offered) is a must. Matching contributions are essentially part of your compensation, and failing to take full advantage is like leaving money on the table.
Whether you have an employer match or not, it’s important to increase retirement savings contributions whenever you receive a raise or have a year with above-average income. To put a finer point on it: don’t let lifestyle creep prevent you from retiring early.
When your income increases, it may be tempting to get a bigger place or buy a new car. But the more money you can save now, the better chance you’ll have to retire early.
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SOURCE: JPMorgan Guide to Retirement 2026
This doesn’t mean you have to live in a house with a leaky roof and hideous linoleum. If you own a home, upgrades and remodeling can be a smart investment. The point is not to spend on things you don’t really need.
High-income earners get an added benefit. Maximizing annual contributions may allow you to reduce your tax burden today and save more for the future.
High-interest credit cards, personal loans and other consumer debt are a major barrier to financial independence. Every dollar spent on interest means one less dollar you have available to invest.
That doesn't necessarily mean all debt is bad. A low-interest mortgage may make sense as part of a broader financial strategy. For example, entering retirement with your home paid off can dramatically reduce your baseline monthly expenses. If your home is already paid off, a rental property could provide an additional source of income in retirement.
Unexpected expenses happen to everyone. Job loss, medical emergencies, home repairs and natural disasters can quickly derail a retirement savings plan.
An emergency fund allows you to cover unexpected bills without relying on high-interest debt or withdrawing money from retirement accounts. Taking money out of your retirement account early can have toxic long-term effects.
For most households, having six months of living expenses in savings is a must. You can use this emergency fund calculator to estimate how much you should have in savings (or other liquid assets) to cover emergency expenses.
That said, an early retiree may want 12 to 24 months of living expenses in a money market account, CDs or other short-term fixed-income products. During a market downturn, you can rely on your liquid assets instead of selling equities that have significantly depreciated.
Rightsizing your emergency fund also depends on your family situation. Are you the emergency fund for your kids or aging parents? A financial advisor can help you take stock of your situation and determine how much money to put in liquid assets vs. long-term investments.
A high-deductible Health Savings Account (HSA) is a tax-advantaged way to help you save for medical, dental and vision care in retirement. Healthcare is one of the largest expenses retirees face, so building dedicated savings for future medical costs can be especially valuable.
Many people think an HSA is just a healthcare spending account. They don’t realize HSA funds can be invested and grow over time, just like a 401(k). Those who can afford to pay current medical expenses out of pocket can allow their HSA investments to grow for years, creating another valuable source of retirement assets.
HSAs also have significant tax advantages:
If your employer or medical insurance provider offers an HSA plan, it’s worth considering.
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SOURCE: Fidelity
Many people assume they can’t access their retirement savings (without penalties) until age 59½. But there’s a window of opportunity for people who are:
If you leave, quit, or are laid off from your job in or after the calendar year you turn 55, the IRS allows you to take penalty-free distributions from your current employer’s 401(k) plan.
Important things to note:
Employers can have special rules and restrictions, so it’s a good idea to consult a financial professional, such as a CPA or financial advisor, before taking advantage of the IRS Rule of 55.
Moving to a country where housing, healthcare and everyday living expenses are substantially lower than in the United States can help your retirement savings go further. Some early retirees live abroad until age 65, when they are eligible for Medicare.
However, this strategy isn't right for everyone. It’s important to weigh the benefits and challenges.
Your ideal retirement strategy depends on your income, tax situation, investment portfolio, spending habits, healthcare needs, family circumstances and long-term goals. But as a general rule:
An experienced financial planner can help you craft a custom strategy tailored to your personal situation. We’ll help you optimize your investments, minimize tax liability and choose the right financial strategies for your long-term goals.
We call it a Wealth of Life Plan. Ready to get started? Contact us online or give us a call at (415) 541-7774.
Disclaimer:
Assembly Wealth (“Assembly”) is an SEC registered investment adviser; however, this does not imply any level of skill or training and no inference of such should be made. The opinions expressed herein are as of the date of publication and are provided for informational purposes only. Content will not be updated after publication and should not be considered current after the publication date. We provide historical content for transparency purposes only. All opinions are subject to change without notice and due to changes in the market or economic conditions may not necessarily come to pass. Mention of a security should not be considered a recommendation or solicitation to purchase or sell the security, and any securities mentioned may be held by Assembly for client portfolios.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
The S&P 500 Index is an unmanaged index generally considered representative of the U.S. large-cap equity market. Investors cannot invest directly in an index. Index performance does not reflect the deduction of fees, expenses, or taxes.
The charts and examples presented are hypothetical and provided solely for illustrative purposes. They are based on assumptions regarding contribution amounts, rates of return, investment time horizons, and other factors that may not reflect actual market conditions or an investor's experience. Actual results will vary and may be materially higher or lower than those illustrated. These examples are not guarantees or predictions of future investment performance or results. The illustrations do not reflect the deduction of investment advisory fees, transaction costs, taxes, inflation, or other factors that may reduce investment returns. Past performance is not indicative of future results.
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