Retiring early is popular and for good reason. If you’re reaching your financial goals sooner, why not take time away from work and long commutes to spend more time with friends and family?
Nearly one in five American adults say they want to retire before age 55, according to data analytics company YouGov. (1) To retire comfortably, the majority of Americans believe they need a nest egg of $1.28 million, according to a survey by the asset management company Schroders (2).
If you’re a middle-aged multimillionaire with monthly spending needs of $10,000 and you have that “magic number” nest egg saved in the bank, you might be tempted to retire as soon as possible.
But the calculations are merciless.
Retiring at 55 instead of 62 or 65 significantly increases the amount of money you need to fund your retirement because you’re too young to access two major safety nets: Social Security and Medicare.
Here’s a closer look at how much you need to save to retire early and why delaying could lower barriers to entry.
Retiring in your mid-50s seems ideal. You still have much of the health and energy to take full advantage of the free time you’ve gained, with decades of enjoyment to come.
But retiring early has two major drawbacks: You are not eligible for Medicare or Social Security benefits. This means that you must purchase health insurance on the open market and cover it in full yourself.
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In 2026, the average American will pay $625 per month for health insurance, according to the Kaiser Family Foundation (KFF) (3). A couple would pay $1,250.
That’s $15,000 a year just for health insurance.
Let’s say – health needs aside – your household expenses are $10,000 per month. You’ll need a portfolio large enough to generate $135,000 in annual passive income to cover these basic needs.
To retire comfortably, you’ll need a retirement portfolio of $3.4 million if you follow the 4% pension withdrawal rulemeaning you would withdraw 4% of your nest egg in the first year of retirement, then adjust it for inflation for the next 30 years.
This simple calculation is just the tip of the iceberg. If you or your partner has chronic illnesses, your health care premiums could be significantly higher.
And if your wealth is tied up in pre-tax retirement accounts, like a 401(k) or traditional IRA, you’ll also need to consider taxes on withdrawals.
All of this means that early retirement is an expensive dream for most people.
That’s why the average retirement age is closer to 62, according to a 2024 study from MassMutual (4).
It’s probably no coincidence that the average retirement age is 62. This is the age at which Americans first become eligible for Social Security.
This monthly benefit is at the heart of most Americans’ retirement plans. As of November 2025, the average monthly Social Security check for retired workers was $2,013.32, according to the Social Security Administration (SSA) (5).
Continuing the previous example, if you and your partner receive a total of $4,000 per month in Social Security benefits, you will need $87,000 in annual passive income to cover living expenses and insurance premiums. This is almost $50,000 less than in the scenario of retiring at age 55.
And you would need a nest egg of $2.18 million to retire comfortably at that age and follow the 4% rule.
In other words, by delaying your retirement by a few years, your “magic number” decreases by more than a million dollars.
Wait a few more years and you will reduce the required nest egg even further.
Delaying retirement until age 65 has two key benefits: Your Social Security benefits increase and you become eligible for Medicare, reducing out-of-pocket health care costs (6).
Assuming your monthly household benefit reaches $4,800, you will need $5,200 in monthly passive income to meet your total spending needs of $10,000 per month.
According to the 4% rule, you would need a nest egg of $1.56 million to be able to live this lifestyle.
You sacrificed 10 years of retirement to get here.
But the barrier to entry is much lower and your risk of outliving your savings is significantly reduced.
If this trade-off seems fair to you, it may be time to reconsider your early retirement dreams and consult a financial advisor who can walk you through the numbers so you can maximize your income and reduce your risks.
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YouGov (1); Schröders (2); Kaiser Family Foundation (3); Mass mutual (4); Social Security Administration (5); Health insurance (6)
This article provides information only and should not be considered advice. It is provided without warranty of any kind.
