Retiring early is popular and for good reason. If you hit your financial targets early, why not step away from work and long commutes to spend more time with friends and family?
Nearly one in five U.S. adults say they want to retire before the age of 55, according to the data analytics company YouGov. (1) To retire comfortably, the majority of Americans think they need a $1.28-million nest egg, according to a survey by asset management firm 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 away in the bank, you might be tempted to retire as early as possible.
But the math is unforgiving.
Retiring at 55 instead of 62 or 65 dramatically increases the amount of money you need to finance 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 the barrier to entry.
Retiring in your mid-50s sounds ideal. You still have much of the health and energy needed to fully enjoy the leisure time you’ve earned, with decades of enjoyment ahead.
But early retirement comes with two major drawbacks: You don’t qualify for Medicare or Social Security benefits. That means you need to buy health insurance on the open market and cover the full cost yourself.
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In 2026, the average American will pay $625 a month for health insurance in 2026, 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 — aside from health needs — that your household expenses are $10,000 a month. You’ll need a big enough portfolio to generate $135,000 in annual passive income to cover those basic needs.
To retire comfortably, you’ll need a retirement portfolio of $3.4 million if you follow the 4% retirement withdrawal rule, meaning you’d draw down 4% of your nest egg in the first year of retirement and then adjust that for inflation for the next 30 years.
This simple calculation is just the tip of the iceberg. If you or your partner have chronic medical conditions, your health-care premiums could be substantially 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 account for taxes on withdrawals.
This all means early retirement is an expensive dream for most people.
It’s why the average age of retirement is closer to 62, according to a 2024 study by MassMutual (4).
It’s probably not a coincidence that 62 is the average retirement age. It’s the age at which Americans first become eligible for Social Security.
That monthly benefit is central to 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).
Using the previous example, if you and your partner collect a total $4,000 a month in Social Security benefits, you’ll need $87,000 in annual passive income to cover living expenses and insurance premiums. That’s nearly $50,000 less than in the retire-at-55 scenario.
And you’d need a $2.18-million nest egg required to retire comfortably at this age and follow the 4% rule.
In other words, by delaying retirement a few years, your “magic number” drops by more than $1 million.
Wait a few years more and you reduce the required nest egg even further.
Delaying retirement until the age of 65 has two key advantages: your Social Security benefits increase and you become eligible for Medicare, reducing out-of-pocket health-care costs (6).
Assuming your household monthly benefit payment jumps to $4,800, you’ll need $5,200 in monthly passive income to match your total spending needs of $10,000 a month.
Based on the 4% rule, you’d need a $1.56-million nest egg to enable this lifestyle.
You’ve sacrificed 10 years of retirement to get here.
But the barrier to entry is much lower and your risk of outliving your savings is greatly reduced.
If this trade-off sounds fair, maybe it’s time to reconsider your dreams of early retirement — and consult with a financial advisor who can run the numbers with you to maximize your income and lower your risks.
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YouGov (1); Schroders (2); Kaiser Family Foundaiton (3); Mass Mutual (4); Social Security Administration (5); Medicare (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
