INSIGHT

How much money do I need to retire at 55?

Michael Watson, Sergio Fernandez • December 22, 2025

If you’re considering retiring at 55, you’ve landed on what many consider the “sweet spot” of early retirement planning. You’re pursuing something ambitious, but you’re also in a much more favorable position than those trying to retire at 40 or even 50.

At 55, you have some distinct advantages working in your favor. You only have about seven years before you become eligible for Social Security benefits. You’ve had access to catch-up contributions for five years. Perhaps most importantly, savings in qualified retirement plans may be available to you penalty-free access through something called the Rule of 55.

The challenge lies in building sufficient wealth while managing the ongoing financial commitments that often come with this life stage—maybe you’re still supporting children through college, caring for aging parents, or dealing with your own evolving healthcare needs.

So, how much do you need to retire comfortably at 55? Let’s find out.

How much do you need in your portfolio to retire at 55?

If you’re aiming to retire at 55, you’ll likely need a sizeable nest egg to cover your living expenses (though it’s often much smaller than if you were retiring 10-15 years earlier).

To get a baseline figure, start by estimating your annual expenses and use a ballpark withdrawal rate. Keep in mind that your nest egg will likely need to last 30+ years. To be more conservative, we created a chart that used a 3.5% annual withdrawal rate.

Annual Expenses	Portfolio Needed (No Bridge Income)	Portfolio with $100K Bridge Income
$80,000	$2.0 million	$700,000
$120,000	$3.0 million	$1.5 million
$160,000	$4.0 million	$2.5 million
$200,000	$5.0 million	$3.5 million

When we talk about bridge income, we’re referring to additional assets outside of your retirement nest egg, such as part-time work, real estate, or other alternative sources of income.

By supplementing your retirement savings with additional income, you reduce your reliance on your portfolio alone to cover your expenses, meaning your nest egg may be able to be smaller.

In the above table, you can see that generating $100,000 annually through part-time work, consulting, or investment income can reduce your needed portfolio by a couple of million dollars.

Another way to reach your target number is to use the salary multiple rule, which suggests having six to eight times your annual salary saved by the time you reach age 55. If you’re earning $150,000, this would mean targeting $900,000-1.2 million.

While this guideline tends to be more accurate for conventional retirement in your 60s, it often falls short for retiring at 55 without substantial bridge income or significant lifestyle adjustments.

Creative ways to work toward your retirement number

Your retirement spending needs at 55 likely extend well beyond basic living expenses. At this life stage, you’re probably juggling some complex financial obligations that will persist into retirement.

Understand your lifestyle requirements

How you want to spend your time—and your money—plays a big role in determining how much you’ll need to retire comfortably at 55. At this life stage, your financial picture is probably more complex than it was in your 30s or 40s, with various commitments that will shape your retirement planning.

Housing decisions

As every homeowner knows, owning property is expensive, and those costs don’t disappear just because you retire. Property taxes, insurance, and maintenance are ongoing realities whether you’ve paid off your mortgage or not.

If you’re like many people at 55, you might own multiple properties or be wrestling with some big decisions about your living situation. Should you downsize to reduce expenses? Stay put and age in place? Maybe you’re dreaming of that retirement home in a different climate or lower-cost area.

When it comes to debt, the decision isn’t always black and white. Yes, carrying mortgage or credit card debt into retirement will increase how much you need in your portfolio. But if you have a low-rate mortgage and your investments are performing well, paying it off early might not be the smartest financial move. It really depends on your specific situation and comfort level with debt.

Healthcare considerations

Here’s something you’ll want to think seriously about: your health and healthcare costs. At 55, you probably have a clearer picture of any ongoing health issues or family medical history that might influence your expenses down the road.

If you’re managing chronic conditions or know that certain health issues run in your family, these considerations should factor into your healthcare budget planning. It’s not the most exciting part of retirement planning, but it’s one of the most important.

Family financial commitments

Family obligations often don’t stop when you hit your 50s. You might still be helping kids through college, supporting graduate school dreams, or even assisting with grandchildren’s education expenses.

Many people also find themselves supporting aging parents with healthcare costs or long-term care needs while still managing their own family’s financial goals.

Your insurance needs are probably shifting, too. As your children become financially independent, you might need less life insurance. On the flip side, long-term care insurance becomes something worth considering more seriously at this stage.

Maximize your savings strategies

Retiring at 55 means you need to be strategic about every savings opportunity available to you, especially the ones that offer unique benefits for your age group. The good news? You have some powerful tools at your disposal.

Foundation strategies

Let’s start with the basics. Maxing out your retirement accounts should still be your priority. Here are the 2025 contribution limits:

401(k) contributions: $23,500 plus $7,500 catch-up
IRA contributions: $7,000 plus $1,000 catch-up
HSA maximization: $4,300 individual or $8,550 family coverage, plus $1,000 catch-up contribution

Those catch-up contributions are a real game-changer for 55-year-old retirees. That additional $8,500 in annual tax-advantaged savings can meaningfully accelerate your timeline, especially when you consider you’ve had five years to take advantage of these higher limits. Every dollar you’ve been able to save above the standard limits has been working for you.

Rule of 55 advantage

Here’s where retiring at 55 offers a unique advantage that younger retirees simply don’t have: the Rule of 55 allows penalty-free 401(k) withdrawals from your current employer if you retire at 55 or later. This eliminates that costly 10% early withdrawal penalty that affects younger retirees, giving you access to your retirement income sooner.

There’s an important caveat, though—this rule only applies to your current employer’s plan, not previous employers’ 401(k)s or IRAs. If you’re seriously considering retirement, planning your departure timing around this rule could save you substantial penalty costs during your early retirement years.

Deferred compensation timing

If you’re a high earner, you might have deferred compensation that becomes accessible around retirement age. These plans often provide guaranteed returns while shifting income to potentially lower tax brackets in retirement, which can work in your favor.

You’ll want to review your payout options carefully. Lump sum distributions might push you into higher tax brackets, while annuity payments provide steady income but less flexibility. It’s worth taking the time to understand your options.

Pension considerations

If you’re fortunate enough to have a traditional pension, it can significantly impact your retirement calculations. Some pensions offer early retirement options with reduced benefits, while others require waiting until full retirement age.

Here’s something worth doing: calculate your pension’s present value to understand its impact on your required portfolio size. A pension providing $30,000 annually could reduce what you need from your investment portfolio by approximately $750,000-850,000 using conservative withdrawal rates. That’s a substantial difference that could change your retirement timeline.

Annuity evaluation

Fixed annuities can provide guaranteed income to bridge the gap until Social Security eligibility. However, current interest rate environments and inflation protection features deserve careful evaluation.

Annuities often make the most sense for retirees who prioritize guaranteed income over portfolio flexibility. Think of them as part of a diversified approach rather than your primary retirement strategy—they’re one tool in your toolkit, not the whole solution.

Bridge the gap to traditional retirement benefits

When you retire at 55, you’re creating a seven-year gap before you can access Social Security and a 10-year wait for Medicare. It sounds like a long time, but it’s much more manageable than the gaps faced by people retiring in their 40s.

Your bridge strategy needs to address both income and healthcare needs during this transition period.

Social Security timing considerations

Here’s where things get interesting from a planning perspective. You can start claiming Social Security as early as 62, but there’s a trade-off—your benefits will be permanently reduced by about 25-30% compared to waiting until your full retirement age.

This decision becomes one of those complex financial puzzles where you’re weighing immediate cash flow needs against lifetime benefit optimization. If you’ve built substantial portfolios, you might choose to delay Social Security to maximize those benefits.

On the other hand, if preserving your portfolio assets is a priority, claiming early might make sense even with the reduced benefits.

Healthcare coverage planning

Let’s talk about healthcare—it’s likely going to be one of your largest retirement expenses during that 10-year gap before Medicare kicks in.

If you’re eligible, you can extend your current employer healthcare coverage via COBRA for up to 18 months, but you’ll be fronting the entire bill, which could be costly. You can also look into private insurance via the ACA marketplace. While you search for plans, bear in mind any specialists, medications, and in-network providers so you can find a plan that works for your health needs.

Something that catches many people off guard is that premium costs can vary dramatically depending on where you live and your income level. If you’re an early retiree with substantial portfolios, you may not qualify for premium subsidies, which means healthcare coverage could become quite a big monthly expense.

Income strategies

The good news is you have several options for generating income during these bridge years, and you can mix and match based on what works best for your situation.

Taxable investment accounts become really valuable here because they provide penalty-free income access and offer flexibility in managing your tax liability year by year. You’re not locked into any specific withdrawal schedule and realized gains are taxed at capital gains rates as long as you hold the asset for at least one year.
Real estate investments can be particularly appealing at this stage. Whether it’s rental properties generating ongoing income or REITs that give you similar exposure without the headaches of direct property management, real estate can provide both cash flow and tax advantages through depreciation deductions.
Roth conversion opportunities become especially valuable during these “lower-income” early retirement years. Since you’re likely earning less than during your peak working years, converting traditional retirement account assets to Roth accounts can optimize your lifetime tax situation. Bear in mind that conversions in your early 60s can impact the cost of Medicare, so ensure your team reviews the pros and cons with you.
Part-time work or consulting often provides both income and a sense of purpose that many retirees find they miss. Your established professional network opens doors to flexible arrangements that simply weren’t available earlier in your career—maybe that’s consulting in your field, teaching, or pursuing something you’ve always been passionate about.

As you’re in this time of lower tax years, it’s also a great opportunity to start planning for larger distributions and events in retirement like RMDs, Medicare, and Social Security.

Create your customized retirement plan

Retiring at 55 is an exciting prospect.

And the truth is, there are a lot of moving pieces to coordinate—planning for Social Security claiming strategies, navigating healthcare coverage gaps, and managing multiple income sources.

It can feel overwhelming to juggle all these decisions on your own, which is why many people find it helpful to work with professionals who understand not just the technical requirements but also the personal side of what makes retirement fulfilling.

Everyone’s version of retirement looks different, and your plan should reflect what matters most to you.

If you’re ready to explore what retirement at 55 could look like for your specific situation, contact BPM’s wealth management team to develop strategies tailored to your timeline, goals, and the retirement lifestyle you’re envisioning.

Frequently asked questions

This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual. This information is not intended for use as tax advice.

The examples given are hypothetical and are for illustrative purposes only. Actual results may vary from those illustrated. Guarantees are based on the claims-paying ability of the issuing company.

Securities offered through Valmark Securities, Inc. Member FINRA, SIPC | Investment Advisory services offered through BPM Wealth Advisors, LLC and/or Valmark Advisers, Inc. each an SEC Registered Investment Advisor | BPM LLP and BPM Wealth Advisors, LLC are entities separate from Valmark Securities, Inc. and Valmark Advisers, Inc. 