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The average target retirement age for a growing number of Americans isn’t 65… It’s 58.

And I’m not talking about million-dollar earners or tech moguls here.

These are everyday middle-class workers—teachers, small business owners, dual-income couples—who’ve built solid portfolios and want to enjoy more of their healthy, active years now, not later.

But here’s the thing: retiring in your 50s requires a very different kind of plan.

One that accounts for early withdrawal penalties, health insurance gaps, and delayed Social Security.

These obstacles are the triple threats of early retirement.

In today’s episode, I’ll share how to combat them and why retiring in your 50s might be more realistic than most think.

The Surprising Reality of Retiring at 58

According to a recent NerdWallet survey, many Americans with solid, but not extraordinary incomes, are aiming to retire well before the traditional retirement age.

More specifically, for American households earning $100,000 or more, the average target retirement age is not the traditional age of 65, like most people assume… It’s 58.

Now, sure, 58 might not seem dramatically early compared to the average retirement age of 62—but here’s the kicker: most retirement calculators still assume you’ll work until 66 or 67.

That’s nearly a decade of difference.

And in my experience working with hundreds of clients, retiring in your late 50s isn’t just a dream.

For many middle and upper-middle-class Americans, it’s entirely within reach—if you start planning early and understand what it actually takes.

Because early retirement isn’t just about how much you’ve saved—it’s about how you use those savings: turning them into sustainable income, managing risk, and bridging the years before traditional retirement benefits kick in.

The Real Money Needed to Retire at 58

So, what does that actually look like?

Let’s start with the numbers.

A common rule of thumb is the 4% rule, also known as the Rule of 25. It says you need to save 25 times your desired annual income to retire.

For example, if you need $100,000 a year from your portfolio, you’d need around $2.5 million saved.

Now, before some of you turn this episode off thinking, “Well, that’s not happening,” let me pause you.

But, as I’ve discussed many times here on the show, the 4% rule is just a starting point, a back-of-the-napkin approach to determining the health of your retirement plan.

Yes, it’s simple and easy to understand, but it’s also outdated and overly conservative.

Modern retirement income frameworks like the Guardrails Strategy often support a starting withdrawal rate closer to 5.5%.

That means you might only need a nest egg closer to $1.8 million to generate that same $100,000.

And that’s before accounting for things like Social Security, pensions, annuities, or rental income—income sources that can dramatically reduce the burden on your portfolio.

Now, maybe you’re thinking,

“Sure, Taylor, that all sounds great, but the average retirement savings for people in their late 50s is only around $500,000.”

That’s true. But averages are misleading. They include everyone—those who started late, never had a plan, or faced major setbacks.

The people retiring at 58 aren’t lottery winners or trust fund babies… but they also aren’t average.

And the fact that you’re listening to this podcast right now tells me that you probably aren’t average either. You’re learning. You’re planning.

And that alone sets you apart.

In fact, research consistently shows that higher financial knowledge leads to higher savings.

So does education level, marital status, and even behavioral traits like being more optimistic about the future and having strong self-control.

So no—average savings won’t cut it. And neither will average planning.

If you want to retire on your terms, especially in your 50s, you need a strategic, intentional plan—and often professional guidance.

The Unique Challenges and Opportunities of 58

And here’s the truth: even with a healthy nest egg, money alone isn’t enough.

Because retiring in your 50s comes with a specific set of obstacles. And if you’re not prepared, they can unravel your plan fast.

I call these main challenges the Triple Threat of Early Retirement:

1. Early Withdrawal Penalties
2. Delayed Social Security
3. Healthcare Costs

Let’s break each of those down.

First, early withdrawals.

Most pre-tax retirement accounts—like traditional IRAs—penalize you for taking money out before age 59½.

If you’re like those in the nerdwallet study and plan to retire at age 58, you’ll have a 1½-year gap where you’ll either need to tap other assets or pay a 10% early withdrawal penalty.

But there are workarounds:

For example, The Rule of 55.

This rule says that if you retire from your job in the year you turn 55 or later, you can withdraw from your 401(k) without penalty.

Not your IRA—just your 401(k). So if early retirement is on your radar, you might consider consolidating more of your pre-tax savings into your company’s 401(k) before you leave.

Rule 72(t) is another option.

It allows penalty-free early withdrawals from retirement accounts (like IRAs or 401(k)s) before age 59½ if the distributions are part of a series of substantially equal periodic payments (SEPPs).

These payments must continue for at least 5 years or until the account holder turns 59½, whichever is longer.

It’s a viable strategy, but just know that there are unique, somewhat confusing rules that need to be followed closely; otherwise, all prior withdrawals become subject to a 10% penalty plus interest.

The second threat is delayed Social Security.

As most know, you can’t claim social security benefits until age 62 at the earliest, which creates a multi-year income gap if you retire in your 50s.

And just because you can claim at 62, doesn’t mean you should. In fact, doing so can reduce your monthly benefit by up to 30% compared to waiting until full retirement age.

It can also potentially introduce more taxes into your situation, mitigating tax planning opportunities in your retirement gap years.

Lastly, Healthcare.

Medicare doesn’t begin until age 65. So, if you retire at age 58, that’s seven full years of bridging the gap with private insurance.

And it’s not cheap. A couple could easily pay $1,000 – $2,000 per month in premiums, depending on income and coverage level.

This is where smart, proactive planning makes a difference.

You can’t avoid the costs, but you can build them into your plan so you aren’t caught off guard.

While planning ahead, you might learn that you’re eligible for income-based subsidies as a result of the Affordable Care Act, which can reduce your healthcare premiums dramatically; however, the subsidies do hinge on keeping your taxable income low.

A single large Roth conversion or asset sale could wipe them out for the year.

These three challenges aren’t deal-breakers. In fact, they’re what make retiring in your 50s such a powerful planning window.

Because retiring earlier than the nationwide average gives you something most people don’t have: Time.

Time to optimize your Social Security claiming strategy.

Time to stay in lower tax brackets and execute Roth conversions at favorable rates.

Time to front-load travel, fitness, and adventure while you’re still young and healthy enough to enjoy them.

You’re not just surviving the “gap years”—you’re using them to build a more efficient, tax-smart retirement.

The Strategic Planning Required for 58

But none of this happens by accident.

Successfully retiring in your 50s requires intentional, strategic planning to navigate those challenges and stay in control—especially during the years before Medicare and Social Security kick in.

Let’s start with healthcare, because it’s often underestimated, and as I just mentioned, can often catch people off guard.

Before 65, you’ll need to budget for private insurance—potentially $24,000 a year for a couple.

Options like COBRA, ACA plans, or even coverage from part-time work should be evaluated side-by-side.

And as I mentioned earlier, ACA subsidies can ease the burden—but only if you manage your taxable income carefully.

Then there’s the income gap.

You might have 1.5 to 4 years—or more—where you can’t rely on IRA withdrawals or Social Security—so where does that income come from?

It could be:

• Taxable brokerage accounts
• Part-time consulting
• Rental income
• Structured portfolio withdrawals that minimize penalties and taxes
• And, while not ideal, even Roth IRA contributions can serve as a backup

These aren’t just financial levers—they’re tools that give you flexibility and control during your early retirement years.

And, of course, don’t overlook your investment allocation. A 58-year-old retiree could be planning for 30–40 years of portfolio longevity.

That sort of retirement timeline demands a healthy amount of investment risk and growth to combat inflation—but it also needs to include enough stability and safety to prevent panic-selling during downturns.

For many early retirees, a more growth-oriented portfolio may feel uncomfortable, but it could be essential for long-term sustainability and longevity.

Determining If 58 Is Right for You

Retiring in your 50s isn’t only a financial calculation—it’s a life decision.

But that doesn’t mean you can ignore the math.

In fact, financial clarity is a crucial first step in figuring out if you’re truly ready.

The 4% rule or Guardrails Strategy we discussed earlier are helpful starting points—but you need a full picture of your income: Social Security, pensions, investment returns, part-time work.

You also need to stress test your plan.

You can do this by running three scenarios: best case, expected case, and worst case.

In the worst scenario, you might model the market crashing in year one of retirement, or lower-than-expected investment returns, or a health event derailing your spending plan.

Then, determine how you would respond to ensure your plan doesn’t break:

Would you reduce spending? If so, how? Would you downsize your home? Or shift your withdrawal strategy?

Crisis planning shouldn’t happen during the crisis. Anticipating these roadblocks now puts you in control when it matters most.

And remember—financial readiness is only half the equation.

Ask yourself:

“Am I retiring from something—or to something? Do I have purpose, structure, and adventure planned? Does work still energize me—or am I just hanging on?”

I’ve seen people with millions saved feel lost and unfulfilled within months of retiring. They weren’t missing income—they were missing intention.

Your Path to Retiring at 58

If you’ve decided that retiring at 58 is your target retirement age, here’s a simple 5-step process to start turning that vision into reality.

Step one: Run the numbers based on your lifestyle goals—not just averages. Get clear on your anticipated expenses, build in a healthy margin for inflation, and don’t forget to budget for extra discretionary spending during the early “go-go” years of retirement.

Step two: Compare that number to your actual portfolio. If you’re behind, you have options: increase your savings rate, adjust your lifestyle expectations, or push your retirement date back slightly. Remember—there’s no shame in retiring at 60 or 62 if that’s what makes the math work.

Step three: Maximize every financial lever in your final working years. That means:

• Making catch-up contributions to your 401(k) and IRAs
• Using a Health Savings Account if you’re eligible—it’s triple tax-advantaged
• Ensuring you get the full employer match on any retirement plan

Step four: Build multiple income streams for those bridge years—those early years before Social Security or Medicare kick in. The more sources you have, the more flexibility you gain. Think: portfolio income, consulting work, or even passion projects that generate modest revenue.

And finally: Stress test your plan annually. Revisit your projections, update your expenses, and evaluate whether your income sources are holding up. Flexibility is your friend. The goal isn’t perfection—it’s progress and resilience.

Bottom Line

Retiring in your 50s doesn’t happen by accident. But with clear targets, consistent savings, and intentional planning, it can absolutely happen by design.

And if you want professional help building a custom retirement strategy, consider reaching out to my firm by following the link in the description right there in your podcast app.

As a reminder, we specialize in helping people over age 50 who have accumulated $2M or more in retirement savings reduce taxes, invest smarter, and maximize portfolio income.

While we are headquartered in sunny San Diego, over 50% of the clients we work with live on the other side of the country. We’re equipped to help retirement savers in every state and would enjoy the opportunity to meet you and see if we can help.

Thank you, as always, for listening. To view the research and articles referenced in today’s episode, just head over to youstaywealthy.com/249.

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.