How to Retire at 50: The Ultimate Guide

Shawn Plummer

CEO, The Annuity Expert

Do you want to know how to retire at 50? It’s not as impossible as it may seem. This guide will discuss the steps you need to take to make early retirement a reality. We will discuss saving money, investing for the future, and planning retirement. If you follow our advice, you will be on your way to a comfortable retirement by reaching 50!

Can I Retire At 50?

The short answer is: maybe. It depends on a few factors, such as how much money you have saved up and your retirement goals. If you’re looking to retire comfortably and still have a good lifestyle, you’ll need to save some money. Experts typically recommend having at least $500,000 saved up before you retire.

Of course, everyone’s retirement goals are different. Some people are content with a more modest lifestyle, while others want to continue living the lifestyle they did before they retired. So it all depends on your circumstances.

How To Retire At 50 Comfortably

If you want to retire at 50, you must have a plan. Just like with anything else in life, if you want to achieve something, you need to have a plan and put that plan into action. The first step is figuring out how much money you’ll need to save to live comfortably.

This can be difficult to answer because everyone’s definition of “comfortable” differs. However, a good rule of thumb is to have at least enough saved to cover your basic living expenses for at least five years. This will ensure you have a cushion in case anything unexpected arises.

Once you know how much money you’ll need to save, you can start working on a retirement plan. There are a few different options when it comes to retirement plans, but the three most popular are 401(k)s, IRAs, and annuities.

How Much Do I Need To Retire At 50?

This is a great question and does not have a simple answer. It depends on your lifestyle and how much money you want to have to come in every month. However, a good rule of thumb is to try and generate at least 75% of your current pre-retirement income.

Annuities

Since you can’t collect Social Security until you’re 62, you’ll likely need other sources of income to cover your retirement expenses. An annuity can be a great option to supplement your income until you start collecting Social Security Income and for the rest of your life.

Annuity Basics

Understanding Lifetime Income Riders

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Which Plans Should I Contribute Ongoingly To Retire At 50?

If you’re younger and your desired retirement age is 50, you might wonder how to retire efficiently.

The first step to retiring at 50 is saving money. It would be best if you started putting away money to save enough by retiring.

  1. Start by contributing to a Roth IRA or a Roth IRA annuity.
  2. After you’ve maxed out a Roth IRA, start contributing to a non-qualified deferred annuity.
  3. Consider a permanent life insurance policy like index universal life insurance if you need a third account.

Why are these plans first?

Because taxes owed in retirement will be minimal or none at all.

After contributions are made to these three plans, then contribute to a 401k or traditional IRA account. You should also start setting aside money each month for a savings account. The more you can save now, the easier it will be to retire later.

Contribute To Various Types Of Investments

The second step is investing in the future. This means putting your money into assets that will grow over time. Stocks, bonds, and mutual funds are all good options to consider. However, it would help if you also considered investing in real estate or other long-term investments. By diversifying your portfolio, you can reduce your risk and increase your chances of a successful retirement.

If you need help choosing the right stocks, we recommend the following:

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Determining How Much Income Is Needed In Retirement

The third step is to start planning for retirement. This includes figuring out how much money you will need to live comfortably in retirement.

It also means estimating how long you expect to live and making sure your money will last throughout your lifetime. Once you have a plan in place, you can start making adjustments to ensure that you are on track to reach your retirement goals.

How To Guarantee (Not Guess) Your Retirement Income Starting Today?

Annuities are the only retirement plan in the United States that contractually guarantees an income for life, even after the annuity has run out of money. These retirement plans can also increase the amount of income regularly to combat inflation and maintain your lifestyle.

Early Retirement Calculator

How To Retire At 50 Paying Little To No Taxes For Life?

If you want to retire at 50 and pay little to no taxes, you must start planning now. There are a few ways to do this, but the most important thing is to make sure you are contributing to suitable types of accounts.

  • Roth IRA: IRS rules state owners are at least 59½ when they take money out of their Roth IRA and must wait for five years before taking a distribution. In turn, all retirement income will be tax-free. Utilizing a Roth IRA Annuity will pay an owner a tax-free income for life.
  • Permanent life insurance: Similar to a ROTH IRA, you can pull money out of your policy without paying taxes. Unlike qualified accounts such as 401(k) and IRAs, you can access the policy via a loan, pre-59.5, without incurring taxes or penalties. In addition, your beneficiary receives the death benefit income tax-free.
  • Non-Qualified Annuities: Only the interest earned is taxed as ordinary income, and once all the interest is spent, all payments are tax-free.

How do I avoid the 10% penalty from the IRS If I retire when I’m 50?

Most retirement accounts have an early withdrawal penalty for any withdrawals made before retirement age. This penalty is usually 10% of the amount withdrawn, and it can significantly impact your ability to retire.

The best way to avoid the IRS penalty is to withdraw from the permanent life insurance policy, 72(t) distribution, or utilize an immediate annuity as a “stepping stone” for income until you reach age 59 ½.

Permanent Life Insurance Policy

A permanent life insurance policy is an excellent way to invest in the future. Not only are the contributions tax-free, but the loans taken from the cash value are also tax-free. This makes permanent life insurance a desirable option for those looking to save for retirement. The only time that taxes come into play is when there is a gain in the cash value.

72(t) distribution

This method avoids the IRS penalty on qualified retirement plans such as a 401(k) or traditional IRA. You can take distributions from your retirement account without paying the early withdrawal penalty if you:

  • Are you age 59½ or older
  • Have a life expectancy of at least 20 years
  • Take substantially equal periodic payments (SEPPs) for at least five years or until you reach age 59½, whichever is longer.

The rule of thumb is to withdraw about four percent of your nest egg each year without worrying about the IRS penalty. So, if you have $500,000 saved for retirement, you could withdraw $20,000 per year without paying the early withdrawal penalty.

72(q) distribution

The same rule applies to 72(t) but the interest earned on a non-qualified retirement plan.

Immediate Annuities

Exclusion Ratio: If the non-qualified annuity is annuitized, only a portion of the payments will be subject to ordinary taxes and a 10% IRS penalty. At age 59.5, the penalty will go away, and payments will be taxed as ordinary income.

Because immediate annuities earn little to no interest, the penalties and taxes won’t dent the payment amount leading up to 59½.

I’m 50, And I Want To Retire Now. What Can I Do?

Split your retirement funds into two annuities, an immediate annuity and a deferred annuity with a guaranteed lifetime withdrawal benefit.

  • Step #1: Utilize your after-tax retirement savings to fund an immediate annuity for ten years or longer. This annuity will supplement your retirement income until you reach 60. Because there is little to no interest involved, the early withdrawal benefit won’t affect your income much.
  • Step #2: Utilize the remaining retirement savings (enough to supplement your future income), purchase a deferred annuity with a guaranteed lifetime withdrawal benefit today, and leave it alone until age 60. At age 60 or later, turn on the lifetime income from the annuity. Now you have an income for the rest of your life, and you’ve avoided penalties.

Use our retirement calculator to determine how much future retirement income you can generate. Then contact us to reverse engineer how much money you need to save going forward if you don’t have enough saved at age 50.

Next Steps

 An annuity is your best option if you want to retire as early as possible, with the least amount of taxes and without running out of money. Click below for a quote, and we can help you get started on the path to a worry-free retirement. Thanks for reading!

How To Retire At 50

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Frequently Asked Questions

How much money do I need to retire at 50?

There is no one-size-fits-all answer to this question. It depends on your individual retirement goals and lifestyle. However, a good rule of thumb is to have enough money saved so that you can replace at least 70% of your pre-retirement income. Then, use our annuity calculator to get an estimate.

What’s the best way to start saving for retirement at 50?

There are a few different ways to start saving for retirement at 50. One option is to catch up on your 401(k) contributions. However, the best way is to use a deferred annuity with a lifetime income rider because you can solve how much and how often you need to save to achieve your future retirement income goals, starting today.

Can I retire at 50 and collect Social Security?

Yes, you can retire at 50. However, you must wait until age 62 (unless disabled) to collect your Social Security benefits.

How can I retire early, before 50?

Utilize an immediate annuity to supplement your monthly income for daily living expenses. Using funds that have already been taxed will minimize any tax obligation. Then, invest the rest for when you reach retirement age.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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