Last Updated: December 19, 2024

If you choose to retire between 50 and 59, you’ll have to wait between 3 to 12 years before you receive Social Security benefits. And if you’re in the early part of your fifties, you’ll need to last a few years before you’re able to make penalty-free withdrawals from your 401(k) and IRA accounts. And remember to account for inflation if you plan to survive several decades on your current savings. 

Average Retirement Savings: Age 50 to 59

Let’s see how your savings stack up against others in their fifties. The average retirement savings for someone between 45 and 55 is $313,220; and for those 55 to 64, the average retirement savings is $537,560.¹ Looking at the example about Bob and Mary in the earlier lesson “How Long Your Savings Will Last By Budget,” it’s clear that you’ll need quite a bit more in your nest egg in order to live several decades without drawing a paycheck.

After all, with savings of $500,000 - more than twice the average savings of those 45 to 55 - Bob and Mary would run out of money in their early-seventies at a monthly spending amount of $4,000. Reducing that amount by half (spending only $2,000 per month) would certainly allow their money to last longer, but can they survive on that amount? Can you? It’s all about figuring out your monthly budget, then weighing your numbers against your savings and your retirement score to see if you’re where you need to be. Below, we’ll discuss how to make your retirement accounts work for you if you’re planning an early retirement. 

401(k)

The average 401(k) balance for 55-64 year olds is $244,750. The median balance is $87.571. Although the median figure is a more realistic indicator of the average person’s situation, you’ll need more than either of these amounts if you plan to retire in your 50s and draw income for the rest of your life.²

If you have a well-funded 401(k), that’s excellent. But don’t count on withdrawing anything from it until you reach 59 ½. Otherwise, you’ll be paying a big chunk in penalties and taxes. If you’re in need of funds earlier, you can enact the “Rule of 55” (if you’ve reached age 55) and pull money from your most current 401(k), assuming you have more than one. Under this rule, you can pull money from your most current 401k without penalty if you’ve hit age 55. But this only applies to that 401k, not those still held by former employers.

The catch-up contribution limit for 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan for employees ages 50-59, remains at $7,500 for 2025. New for 2025, based on changes made under the SECURE Act 2.0, a higher catch-up limit of $11,250 now applies to employees ages 60-63 who participate in these plans. The IRA catch-up contribution limit for individuals aged 50 and over remains unchanged at $1,000.³ This is something to weigh heavily if you’re considering retiring in your 50s. You’ll be exiting the workplace during a decade that could otherwise be one of the biggest wealth-building decades of your life. There’s no doubt that ten to twenty years of extra contributions will give your 401(k) a healthy boost. 

Individual Retirement Account (IRA)

Once your employer has maxed out matching your 401(k) contributions, it’s a good idea to consider other investment options, like an IRA or Roth IRA.

If you are planning to retire in your 50s, hopefully you’ve been contributing to an IRA for years because they offer great tax advantages. A traditional IRA allows tax-deductible contributions but taxes withdrawals. On the other hand, a Roth IRA taxes contributions but, after age 59 ½, allows for tax-free withdrawals. In 2025, the contribution limit to your IRA is $7,000 up to age 50 and $8,000 thereafter.

How much should I have in my IRA at 55? 

While everyone’s goals and dreams are different, many people who aim to retire in their 50s have been saving since that first paycheck. Indeed, if you contributed the maximum amount to an IRA starting at age 23, you could now be sitting on a nest egg of more than $700,000 in your IRA. If that’s the case, be sure to enter this into the Silvur app when you calculate your Retirement Score. Savings like this could be the difference between a Retirement Score that says you’re ready to retire, and one that indicates you need to take another look at your strategy. 

Roth Conversions

Another strategy for early retirees is a Roth conversion. Here, you’ll convert your assets to a Roth IRA, allowing your money to continue to grow tax free. And when the time comes, you’ll also benefit from tax-free withdrawals. Roth conversions will work in your favor if you think your retirement income will increase or stay the same as your current income, because it will decrease your future tax bill on withdrawals. There’s no limit on how much money you can convert to a Roth IRA. But however much you do convert, know that it will count as taxable income which could bump you into a higher tax bracket. 

Here’s a tip: consider spreading your conversions over time if your income stays relatively consistent year over year. This will ensure you don’t get a big tax bill by converting all at once.

As a reminder, you’ll be subject to Required Minimum Distributions (RMDs) once you hit 73 (or 72 depending on your birth year) and by converting qualified RMD accounts—like IRAs and 401(k)s—into a Roth IRA, you’ll not be subject to RMDs and have tax-free withdrawals.

Pension

If you’ve earned a pension during your working years, it’s yet another tool that can get you closer to your goal of retiring in your fifties. While state pensions don’t start paying out until you reach age 66, you can withdraw money from most workplace or personal pensions when you turn 55. It’s important to check the exact rules for your pension, since they’re all different. 

Per the Pensions Right Centers, the median private pension benefit of individuals age 65 and older was $11,040 a year. The median state or local government pension benefit was $24,980 a year.⁴

You can withdraw money from your pension as a lump sum or a monthly payout. A good way to support an early retirement is to take the money as a lump sum payout and invest it in an ETF or mutual fund to let it continue to grow. This strategy is best if you have experience managing your own investments.  

SOURCES

1. Benson, Alana. “What Is the Average Retirement Savings by Age?” NerdWallet,7  May 2024, https://www.nerdwallet.com/article/investing/the-average-retirement-savings-by-age-and-why-you-need-more. Accessed 1 December 2024.
2. O’Shea, Ariella. “What Is the Average 401k Balance by Age?” NerdWallet,22 Nov 2024, https://www.nerdwallet.com/article/investing/the-average-retirement-savings-by-age-and-why-you-need-more. Accessed 1 December 2024.
3. “401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000.” IRS.gov, 1 November 2024, https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000. Accessed 1 November 2024.
4. “Income from Pensions.” Pension Rights Center, 23 October 2023, https://pensionrights.org/resource/income-from-pensions/. Accessed 1 December 2024.