Trading News

How to Retire Comfortably at 57

0

S&P Futures

3,636.25

-17.00(-0.47%)

 

Dow Futures

29,231.00

-122.00(-0.42%)

 

Nasdaq Futures

11,046.00

-55.50(-0.50%)

 

Russell 2000 Futures

1,698.00

-8.70(-0.51%)

 

Crude Oil

91.82

-0.82(-0.89%)

 

Gold

1,695.40

-13.90(-0.81%)

 

Silver

19.77

-0.48(-2.39%)

 

EUR/USD

0.9739

-0.0004(-0.04%)

 

10-Yr Bond

3.8830

+0.0570(+1.49%)

 

Vix

31.36

+0.84(+2.75%)

 

GBP/USD

1.1078

-0.0020(-0.18%)

 

USD/JPY

145.4410

+0.1110(+0.08%)

 

BTC-USD

19,453.08

+82.16(+0.42%)

 

CMC Crypto 200

444.09

-10.94(-2.40%)

 

FTSE 100

6,991.09

-6.18(-0.09%)

 

Nikkei 225

27,116.11

-195.19(-0.71%)

 

How to Retire at 57

Choosing the right age for retirement means understanding all the planning that’s required beforehand, as well as what you may need to do afterward if you retire early. The way you shape your financial plan can be very different if you plan to retire at 57, for example, versus waiting until age 65. While retiring at 57 might be your goal, you’ll need to understand what early retirement means when it comes to things like Medicare planning, retirement account withdrawals and Social Security.

If you have questions about your specific situation, consider speaking with a financial advisor.

Challenges of Retiring at 57

If you want to retire at 57, the first step is recognizing the unique challenges you may face financially. Specifically, some of the issues you’ll have to contend with include:

Covering income gaps until you’re eligible for Social Security benefits

Paying for healthcare coverage until you’re eligible for Medicare

Generating income until you’re eligible to withdraw from qualified retirement plans (only exception is the rule of 55 for 401(k)s)

Managing early withdrawals from 401(k) plans or individual retirement accounts (IRAs), if necessary

Saving enough so that you don’t run out of money in retirement

If you’re married, you’d also need to consider the timing for your spouse’s retirement if they’re working. And if you have kids, you may want to think about how retiring at 57 may affect your ability to save for or help with their college expenses if that’s something you’d like to do.

How Much Money Will You Need to Retire at 57?

The amount of money you’ll need to retire at 57 can depend on several things, including:

Your anticipated retirement lifestyle and retirement budget

Your life expectancy

Where you expect your retirement income to come from

A common rule of thumb for retirement saving is to have 10 times your income in the bank by age 67. So if you make $75,000 a year, you’d want to have $750,000 saved for retirement.

You could still follow this rule if you plan to retire at 57. But you have to balance that against the fact that this money is going to need to last you longer if you’re retiring early. For that reason, you may want to increase your multiplier to 12, 15 or even 20 times your income, based on your desired retirement lifestyle.

This is where a retirement calculator can help. For example, say you’re 30 years old making $75,000 a year. You want to retire at 57 and plan to spend $3,000 a month in retirement, with a life expectancy to age 95. Based on those numbers, you’d need approximately $2.2 million in retirement savings. If you’re starting from $0 with savings, you’d need to set aside $2,000 a month and earn a 7% average annual return to have enough money to retire at 57.

That’s not an unrealistic goal if you’re disciplined about sticking to it. Planning your retirement budget, analyzing your current savings and savings rate, then running the numbers through a calculator can tell you if you’re on track or if you need to make significant adjustments to your savings rate. While you’re reviewing your savings rate, check the amount you’re saving in your 401(k) if you have one.

If you’re not saving enough to get the full employer match, you may want to make adjustments to your savings rate. And if you can afford to step up your contributions to reach the annual maximum limit that could help you to get closer to your goal of retiring at 57. The same applies to maxing out an IRA.

401(k) and IRA Withdrawals

How to Retire at 57

Both a 401(k) and an IRA have age restrictions on withdrawals. Generally, IRS rules prohibit taking money from these accounts before age 59 ½ without a penalty, unless you qualify for an exclusion or exception. That means if your goal is to retire at 57 you’ll have to decide whether to leave the money in these accounts alone until you reach the age threshold or take money out early and pay the penalty.

The early withdrawal penalty for early withdrawals from a traditional IRA is 10%, plus ordinary income tax on the amount withdrawn. With a Roth IRA, you can withdraw your original contributions at any time without a penalty, as long as your account has been open five years or longer. Early withdrawals of earnings could trigger a 10% penalty and you may owe income tax.

There is a work-around of sorts. You could convert traditional IRA assets to a Roth IRA. In that instance, the 10% early withdrawal penalty would only apply if you’re taking money out within the first five years of completing the conversion. You can’t escape tax liability completely, however, since you’d owe ordinary income tax on any traditional IRA amounts you convert at the time of the conversion.

With your 401(k), you could take advantage of the rule of 55. This IRS rule says that if you leave your job at age 55 or older you can take money from your 401(k) without an early withdrawal penalty. You’d still have to pay income tax on the money you withdraw but it’s good to know that you could tap into your 401(k) early without a penalty if you don’t have other savings to fall back on.

Can I Take Social Security at 57?

The short answer is no, you’re not eligible to receive Social Security retirement benefits at age 57. The earliest you can begin taking Social Security for retirement is age 62. So if you plan to retire at 57 you’ll be waiting at least five years before you can claim those benefits. And you may want to wait until you reach full retirement age or later if you don’t necessarily need Social Security to supplement your income right away.

Keep in mind that taking Social Security before full retirement age reduces your benefit amount while delaying benefits can increase the amount you receive per month. So consider the best time to take Social Security, based on the other sources of income you have.

If you plan to take Social Security at 62, you’ll have to figure out where your income is going to come from during those in-between years. Again, taking money from an IRA early can result in an early withdrawal penalty. So you may want to tap into a taxable brokerage account instead. The downside of that, however, is that you’ll owe capital gains tax if you’re selling off assets at a gain. That can affect your tax liability year to year in early retirement.

You could draw on other savings, such as money held in CDs, U.S. Treasuries or a high yield savings account. You may still pay tax on interest earned but it’s likely to be less than what you would owe in capital gains for an investment account.

Healthcare Planning for Early Retirement

Medicare eligibility doesn’t begin until age 65, meaning that if you plan to retire at 57 you’ll have an eight-year gap in which you’ll need to consider how to manage health care. If your spouse is still working you may be eligible to join their health care plan. But if your spouse plans to retire early or doesn’t have health insurance at work you’ll need to assess your options.

COBRA coverage may cover the gap temporarily, though premiums may be expensive and take a toll on your retirement budget. You could also look into purchasing insurance through the health care marketplace. Healthcare sharing plans, which aren’t insurance but allow you to pool medical bills with other people, are a third option.

If you have a health savings account (HSA) as part of your high deductible health plan, this can be an untapped goldmine for early retirement. The money that goes into an HSA is designed to be used for health care. Unlike a Flexible Spending Account (FSA), an HSA is not use it or lose it, meaning you can allow the money to sit until you need it. Meanwhile, this money can earn interest if you’ve invested it.

During your working years, you can contribute up to the HSA limit the same way you would a 401(k) or IRA. Your employer may offer a matching contribution to your 401(k) account. Contributions are tax-deductible and grow tax-deferred. Withdrawals are tax-free when you use them to pay for qualified medical expenses, which can include health care costs incurred prior to becoming Medicare-eligible. And at age 65, you can use the money in an HSA any way you like, which is a plus if you stay healthy. You’ll just have to pay income tax on withdrawals for any non-medical expenses.

Also, consider what your long-term health care needs may be. Medicare does not cover long-term nursing care, though it is covered by Medicaid. But to become Medicaid-eligible you’d need to first spend down your assets. If you’d rather avoid that, you may want to look into purchasing a long-term care insurance policy or a hybrid life insurance policy in your 40s or early 50s so that if the time comes, you have insurance to pay for nursing care if necessary.

Bottom Line

How to Retire at 57

Deciding to retire at 57 is a goal that requires some forethought, planning and careful calculations. The last thing you want is to run out of money in your later years when you’re supposed to be enjoying traveling, spending time with your family and relaxing. Meeting with a financial advisor can help you come up with a workable plan that you can review each year and adjust as needed. Depending on how far you are from your desired retirement year, this level of planning could be just what you need to make your dream a reality.

Retirement Planning Tips

Consider talking to a financial advisor about whether retiring at 57 is a realistic goal for your personal situation. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

An annuity can provide a steady stream of income in retirement. Annuities are insurance contracts in which you pay a premium upfront and the annuity company then pays the money back to you at a later date. You could use an annuity to supplement your income in the period between age 57 and whenever you plan to take Social Security or become eligible for penalty-free 401(k) or IRA withdrawals.

Photo credit: ©iStock.com/diane39, ©iStock.com/LifeJourneys, ©iStock.com/VMJones

The post How to Retire at 57: Step-by-Step Plan appeared first on SmartAsset Blog.

SmartAsset

Should You Invest in Annuities During Inflation?

There are many financial products you can choose to invest in as a part of your retirement portfolio. One of the most complex is an annuity, which is a product that requires a premium payment up front in exchange for … Continue reading → The post Are Annuities Safe to Invest In? appeared first on SmartAsset Blog.

SmartAsset

How to Protect Your Retirement Savings When The Market’s Bad

The primary risk that retirees and those approaching retirement face is an obvious one: running out of money. However, a study published in the Journal of Financial Planning suggests reverse mortgages can help retirees protect their portfolios from market dips … Continue reading → The post This Strategy Can Preserve Your Retirement Savings in a Down Market appeared first on SmartAsset Blog.

Investopedia

Should Retirees Pay Off Their Mortgages?

Whether retirees should pay off their mortgages depends on a number of factors that need to be carefully weighed.

SmartAsset

Gold vs. Silver: Is Either a Good Investment During Inflation?

Commodities trading means you’re buying and selling raw materials rather than finished products (like a house) or financial assets (like stocks and bonds). Commodities are assets like corn, coffee, lumber and ore. One common form of commodities trading is investing … Continue reading → The post Gold vs. Silver Investments: Which Is Better? appeared first on SmartAsset Blog.

Barrons.com

Stocks Poised to Open Lower on Monday

The Federal Open Market Committee will release the minutes from its September meeting on Wednesday, and the Bureau of Labor Statistics will report the September consumer price index on Thursday morning.

Reuters

Stocks slip in Asia, brace for CPI and earnings

Stocks slipped in Asia on Monday after a surprise drop in U.S. unemployment quashed any thought of a pivot on policy tightening ahead of a reading on inflation which is expected to see core prices move higher again. Holidays in Japan and South Korea made for thin trading in Asia, while the Treasury market is also shut on Monday. S&P 500 futures led the early action with a drop of 0.5%, while Nasdaq futures fell 0.6% as U.S. earnings season kicks off later this week.

Bloomberg

Fed Officials Won’t Relent on Path to 4.5% and May Move Higher

(Bloomberg) — The Federal Reserve is closing ranks around a goal of quickly raising their benchmark interest rate to around 4.5% then holding it there, while being prepared to go higher if elevated inflation fails to show signs of easing.Most Read from BloombergUkraine Latest: Putin Calls Security Meeting, Comments on BridgeRussia Races to Reopen Crimea Bridge Damaged in Fiery BlastPutin Orders Sakhalin-1 Project Transferred to Russian EntityEight Years of Combat Hardened Ukraine’s Army Into a

Barrons.com

Brace for Mortgage Rates to Climb Higher After the Jobs Report

The link between the cost of purchasing a home and the strength of the labor market may not be obvious, but it comes down to this factor: the Federal Reserve’s fight against inflation.

Bloomberg

How a Ban on Russia’s Mining Giants Could Shake the Metals World

(Bloomberg) — Most Read from BloombergUkraine Latest: Putin Calls Security Meeting, Comments on BridgeRussia Races to Reopen Crimea Bridge Damaged in Fiery BlastPutin Orders Sakhalin-1 Project Transferred to Russian EntityEight Years of Combat Hardened Ukraine’s Army Into a Fighting ForceA possible ban on Russian supplies by the London Metal Exchange would be a seismic event for the metals industry, cutting some of the world’s biggest companies off from the main global marketplace.The exchange

MarketWatch

1 in 5 retirees doesn’t see this expense coming — or its $315,000 price tag

Only about one in four retirees has not experienced any kind of shock event in retirement, according to a study from the Society of Actuaries. “These are almost impossible to predict, but taking care of someone’s long-term care needs can get extremely expensive,” he says, adding that this type of care could also include helping a loved one with addiction, a divorce settlement, bankruptcies and other financial focused needs.

TheStreet.com

PayPal Sets Social Media Ablaze with Major Change

PayPal is in trouble. “You are independently responsible for complying with all applicable laws in all of your actions related to your use of PayPal’s services, regardless of the purpose of the use,” the document, called “Acceptable Use of Policy,” said.

MarketWatch

He raked in $990,000 playing in the NFL last year, teaches finance at UPenn, and interned at UBS. And he’s got a simple piece of money advice we all may need to hear right now.

NFL linebacker Brandon Copeland made $990,000 in the NFL last year, according to CBS Sports — but that’s not even close to the most fascinating thing about him. While attending the University of Pennsylvania, he interned at UBS and has since returned to his alma mater to teach a financial literacy course. One piece of his advice that feels particularly relevant now — as a recession may loom and some savings accounts are paying more than they have since 2009 (see the best savings account rates you may get now here) — is this: You need an emergency fund.

TheStreet.com

Elon Musk’s Private Messages with Billionaire Pals

In Musk v. Twitter, a part of the business life of the richest man in the world is revealed. Private messages exchanged with his inner circle immerse us into his process when he conceives an idea. The messages were released by the Delaware Chancery Court as part of the proceedings between the two parties.

Motley Fool

3 Top Oil Stocks to Buy on OPEC’s Latest Move

Oil prices have bounced around quite a bit this year. Brent oil, the global-pricing benchmark, started 2022 below $80 a barrel before soaring into the $120s following Russia’s invasion of Ukraine. With the prospect of higher oil prices, we asked some of our energy contributors what oil stocks they believe are best positioned to capitalize following OPEC’s bold move.

Motley Fool

3 Companies That Could Be Worth $1 Trillion by 2030

The three stocks that stood out to me are Taiwan Semiconductor (NYSE: TSM), Disney (NYSE: DIS), and Adobe (NASDAQ: ADBE). The company is a third-party manufacturer for chip leaders like Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), and dozens of other companies designing their own chips.

Investors are dipping a toe back into high-yield ETFs. Here’s what you need to know

Previous article

Musk says Beijing doesn’t want him to sell Starlink in China

Next article

You may also like

Comments

Leave a reply

Your email address will not be published. Required fields are marked *

More in Trading News