Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin
Hurry Up!
Save upto ₹54,600 in taxes under 80C & 80D. Buy a term insurance plan now!
View Plans

How Much Money Do I Need To Retire Comfortably At Age 55?

Updated On Aug 05, 2021

The financial demands of each retired individual will change due to differences in their retirement plans, healthcare, geography, source of income, and other factors. However, regardless of your personal circumstances, there are a few key financial considerations to keep in mind when determining how much money you'll need to retire at 55. "How much do I need to retire at 55?" is the first question that comes to mind while thinking about retiring at 55. However, without a suitable plan in place, analysing the corpus you'll need to save in order to have a happy retirement can be difficult.

How Much Money Do I Need To Retire Comfortably At Age 55?

When it comes to finances, everyone has distinct demands as they approach retirement. Someone may be completely reliant on their retirement pension plan, whilst another may have a source of additional income after retirement or a side hustle. So it varies depending on what one's post-retirement priorities are and how much money one has set aside for them. While there are several factors that impact how much money you'll need to retire at 55, read on to learn about the most important ones.

1. The Corpus Amount Earned From Your Retirement Funds

Examine your retirement goals, including travel, upsizing or downsizing your living space, and engaging in other activities, as well as any associated expenses or funds, with that figure in mind. Then calculate how much you can afford to take out of your retirement account each year. To retain the principal over the course of your retirement, you may decide to withdraw only a fraction of the potential growth of your investments each year. You may opt to increase or even maximise withdrawals from one or more of your retirement accounts if you have diversified your retirement income.

2. The Taxed Value Of Your Retirement Corpus

Retirement does not, however, free you from paying taxes. Any withdrawals from tax-deferred retirement funds, such as a traditional IRA or an individual retirement account (IRA), will be taxed as regular income. Furthermore, once you turn 70, you must begin drawing annual required minimum distributions (RMDs) and paying ordinary income tax on them. Because a percentage of the money in your tax-deferred accounts is effectively designated for the government, the quantity of money in your tax-deferred accounts does not truly reflect your spending power.

3. Your Entitlement To Social Security Benefits 

Social Security benefits are not available to retirees until they reach a certain age. The earliest you may start receiving Social Security retirement benefits is at age 62, so if you retire at 55, you'll need to plan properly for at least two to three  years of pension income without the help of Social Security. It's also worth keeping in mind that Social Security benefits are never guaranteed. However, you should consider delaying your Social Security application even longer because if you begin receiving benefits before reaching full retirement age, which is generally between 55 and 65 depending on the year you were born, your monthly benefit amount will be permanently reduced by up to 30%.

Take Away

Though the financial details of early retirement will differ from one early retiree to the next, anyone considering leaving the working at the age of 55 should consider their retirement funds, taxes, Social Security, and health-care costs before taking the plunge. Consult a financial counsellor to build a retirement strategy that is in line with your financial goals.

Also Read:  How Do Retirement Plans Work?

How Many Years Does a Pension Last?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 66 Lacs+ happy customers