Retiring early is a great idea if you can afford it.

Unfortunately, few people plan for retirement as well as they should. A common rule
of thumb is to save 10 times your final salary to retire by age 67. For someone with
an annual salary of $50,000, that would mean having $500,000 saved in retirement
funds.

If you want to retire early, you probably already know you need to have a good
chunk of money saved. But there are some other things you can do too:

Check Federal Benefits
The Social Security Administration has rules for when benefits can start to be
collected. The longer you put them off, the more money you can get. To receive the full amount of benefits, you must reach full retirement age. Learn more.

If your full retirement age is 67 and you choose to collect Social Security benefits at
age 67, you’ll get 100 percent of your benefit amount.

If you start your retirement benefits at age 62—the earliest age to receive them
your benefit is reduced by about 30 percent. At age 63 it drops about 25 percent
and at age 66 it drops 6.7 percent.

Starting Retirement Benefits
Retirement plans also have restrictions on when they can be used. Money can be
withdrawn from a 401(k) retirement plan without paying a 10 percent penalty at age
59-1/2.

However, there’s a provision for taking out 401(k) funds as early as age 55 without
a penalty if you retire early. Your employment must have ended in the year you turn
55, and the money in the plan must stay in the 401(k) plan to access it without
having to pay a penalty.

How Much Income Will You Need?
Determining how much income you’ll need in retirement isn’t easy. There are many
expenses to consider, so your annual income in retirement is a moving number.
One rule of thumb for calculating how much income you’ll need in retirement is to
have 70 – 90 percent of your annual pre-retirement income. This can come from
retirement accounts, Social Security and other savings you might have. You could
also supplement it with part-time work.

Withdrawing 4 percent from your retirement account is a good starting point. You
may also have IRAs, investment accounts, rental property and dividend-paying
stocks to rely on.

List Expenses
Your expenses in retirement should change. You’ll probably no longer need to use
your car as much to drive to work, you can find a more affordable place to live and
you may not have a mortgage any longer. But other expenses may increase. These
can include healthcare, travel, retirement hobbies and a home remodeling project.
You should also plan for emergencies, such as paying for emergency medical care,
a major home or car repair and long-term care.