Retire by 50: How to Manage Your Finances to Retire Early

Dennis G. Murray, MA


August 16, 2017

In This Article

How to Make the Money Last Past Age 50

Most financial planners say you should withdraw no more than about 4% to 5% of your assets a year if you want to make your money last throughout retirement. You might be able to go higher if, for example, you've earned a pension, enjoy rental income, or have sizable amounts in liquid, non-tax-deferred investments, but this is where it makes good sense to break out pen and paper and do some estimating. The value of your current assets, how many years you'll expect to need the money, and the amount you plan to withdraw each year can be plugged into a retirement calculator. (Most investment companies, including Edward Jones, T. Rowe Price, and Vanguard, have one on their website.)

Although it's impossible to know what twists and turns life will throw at you between now and your retirement party, you'll at least have some sense of how much you'll need to have saved before you can make your dream a reality. And if you don't already have one, work with your financial planner to walk you through any number of scenarios.

Unless you've inherited a large sum of money or landed some other windfall that made early retirement a possibility, you'll probably do well to stay the course with your current diversified investment plan. In general, that means rebalancing your portfolio if one type of asset class gets too top-heavy. Sticking to your investment plan will increase the odds of having your money last for several decades, perhaps even longer than the time you spent working.

Piling money into conservative investments such as Treasury bills or certificates of deposit, whose yields (at least currently) aren't even keeping up with the rate of inflation, isn't going to throw off enough income to keep you from dipping into the principal. In short, at this time in your life, you don't want to adopt an "under the mattress" mentality toward investing.

Some physicians who retired before age 50 say they sleep better at night by working part-time. "A doctor might still enjoy helping others but is getting burned out working 60-hour weeks," says Joe Hearn, CRPC, vice president of Teckmeyer Financial Services in Omaha, Nebraska. "Once the resources are there, he or she might not choose to retire completely." Working even 10 or 15 hours a week can help maintain a nest egg in the early years of retirement, when it's critical not to draw down too much, Hearn adds.

One of Joel Greenwald's clients, a primary care physician, "retired" to half-time at age 50 and remains happy with her decision. Another client, a subspecialist who was earning considerably more than the primary care physician, was miserable in his job and chucked medicine for good. Both physicians made their respective decisions in 2007, at the height of the last bull market. When the market cratered in 2008, the subspecialist took the bigger hit, which soon became compounded by the fact that he wasn't working anymore.

"While the numbers technically work for him to remain retired, there isn't the margin of safety I'd like to see for what could be another 30 or 35 years in retirement," Dr Greenwald said, adding this caution: "I've since learned that portfolio values at the top of bull markets are not to be relied upon, and even the most sophisticated planning software doesn't adequately take that into account."


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