Whether you’re making a budget or planning your retirement date, it typically comes down to the same basic math: how much money you can reliably generate and how does that compares to your budget. To help you estimate how much you will need for retirement, let’s work through an example of a 50 year old with $875,000 in a 401(k) and an all-in budget of $5,000 per month ($60,000 per year).
A financial advisor can help evaluate income sources, model withdrawal strategies and assess how long your savings may last based on different assumptions.
Create a Budget to Estimate a Retirement Date
Estimating a retirement date starts with a clear picture of what you spend. An “all-in” budget accounts for regular monthly costs, including housing, insurance, utilities, debt payments, food, transportation and recurring discretionary expenses. In this example, total spending is $5,000 per month, or $60,000 per year ($5,000 × 12), which serves as the income target retirement savings must support.
This baseline reflects predictable spending only. Irregular or one-time costs, such as travel, home repairs or medical expenses, fall outside the monthly figure and typically require additional flexibility to avoid drawing down savings unexpectedly.
At age 50, it also matters which expenses are likely to change over time. Costs such as childcare or education savings may decline, while others, including health insurance, out-of-pocket medical costs and long-term care coverage, may increase as retirement approaches.
Some guidelines estimate that retirement spending may be lower than pre-retirement spending. Using an 80% assumption, a $60,000 annual budget translates to $48,000 per year ($60,000 × 0.80), or $4,000 per month. This example continues to use the full $5,000 monthly figure to reflect current spending.
Estimate Your Social Security and Returns
Even with uncertainty around the program, many households still factor Social Security into retirement planning. With a household budget of $60,000 per year, unless you have an outsized saving plan, it’s likely that you have a pre-tax income of around $83,000 per year. Using SmartAsset’s Social Security calculator, that income would translate to about $3,496 per month, or $41,452 per year, in Social Security income if you claim benefits at age 65.
For a comparison, if you claim benefits at the earliest age (62), your annual estimate would go down to $2,819 monthly ($33,828 annually). At age 66, your benefit would go up slightly to $3,764 monthly ($45,179 annually) when compared with your initial estimate at age 65. And at age 70, your benefit would go up to $5,001 monthly ($60,023 annually).
Now, let’s take a look at your portfolio. Using SmartAsset’s 401(k) calculator, if you have $875,000 in your 401(k) at age 50, and continue contributing 10% of your pre-tax income (roughly $8,000 per year), an annual rate of return of 7% could grow your savings from $875,000 to $1.275 million by age 55.
For a comparison, let’s assume that you are willing to take on more risk. If you shift your portfolio into an S&P 500 index fund to pursue the market’s average 12% annual return, you might have a 401(k) worth around $1.595 million at 55.
Alternatively, if you may prioritize preserving capital, shifting toward lower-growth, higher-security assets might be your option. For example, the corporate bond market offered an annual yield of approximately 4.28% in January 2026 1 . While returns are lower, income is more predictable, which would result in a portfolio worth roughly $1.124 million by age 55.
You Can Retire Soon, Depending on Your Financial Goals
So when can you retire? Based on these assumptions, retirement may be possible as early as age 55, depending on lifestyle and spending needs.
Access to retirement funds is a key constraint. The IRS generally restricts penalty-free withdrawals from tax-advantaged accounts until age 59½. However, if you leave your job in or after the year you turn 55, you can take distributions from your 401(k) without the 10% early withdrawal penalty. If you leave work before age 55, withdrawals from a 401(k) typically remain subject to penalties until age 59½. In limited cases, IRS Rule 72(t) allows penalty-free early withdrawals from an IRA, but only under specific conditions.
Other factors also affect the timing of retirement, including health care, inflation and taxes. Retiring before age 65 requires paying for health insurance until Medicare begins. Social Security benefits also do not start immediately. While benefits can begin as early as age 62, claiming later, such as at age 67 or 70, increases lifetime payments. Until then, higher withdrawals from retirement savings may be needed. In addition, 401(k) withdrawals are generally taxable as ordinary income, and a portion of Social Security benefits may also be taxable.
With these factors in mind, the income goal is a stable $60,000 per year of after-tax, inflation-adjusted spending. Before age 67, that may require about $70,000 per year in gross withdrawals to net $60,000 after taxes. After age 67, roughly $45,000 in portfolio withdrawals combined with about $25,000 in Social Security benefits could produce a similar after-tax amount. These figures do not include state or local taxes.
Under certain assumptions, this income level could be reached immediately, but doing so would involve early withdrawal penalties and would rely on consistently strong investment returns. Even modest market declines early in retirement could increase the risk of running short of funds.
If contributions continue for a few more years, the outlook changes. Saving 10% of income, or $8,000 per year, with an assumed 8% annual return could grow the portfolio to about $1.334 million by age 55 and roughly $2.014 million by age 60.
At $1.334 million, annual withdrawals in the $70,000 to $100,000 range may be sustainable over a long retirement horizon, with Social Security adding support later. Waiting until age 60 increases flexibility and margin for error. Based on these assumptions, retiring in about five years provides a more stable outcome than retiring immediately.
Bottom Line
A financial advisor can help tie these pieces together by reviewing your budget, estimating Social Security benefits, modeling different investment return and withdrawal scenarios, and assessing how long your savings may last under varying assumptions, which can clarify how changes in spending, retirement timing or market performance affect the sustainability of your retirement income.
Retirement Planning Tips
- A financial advisor can help by modeling income and withdrawals to evaluate whether early retirement is sustainable. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to retire early, here are eight general investing strategies that could help you reach that goal.
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