Early Retirement Calculator: Plan for the Gap Years

Figure out what it takes to retire early, whether that’s age 55, 60, or any other time. We look at two stages:

  1. First, withdrawing from retirement savings before starting income (from Social Security or pensions)
  2. Next, taking retirement income and supplementing the income from withdrawals.

Scroll down below the calculator for more information.

This calculator breaks retirement into two phases that you’ll need to fund:

  1. A “Bridge” phase when you retire and spend from assets before taking income from Social Security or pensions
  2. A second phase where your retirement income supplements your withdrawals

When you retire early, you typically aren’t eligible to take income from Social Security or a pension right away. Of course, it depends exactly how early you retire. For example, retirement planning relies on several important ages, and most people can’t claim Social Security until 62 at the earliest. 

In many cases (not always), it makes sense to delay claiming for as long as possible. There are two potential benefits of that approach:

  • You allow your benefit to grow as much as possible, creating the highest monthly income possible.
  • You can use tax strategies to manage your taxable income over time.

With a so-called retirement bridge strategy, you do just that:

  1. Stop working when you’re able to.
  2. Spend from assets at a relatively high rate.
  3. Turn on retirement income and withdraw from your savings more slowly.

During the bridge stage, you might simply pull from pre-tax retirement accounts and taxable brokerage statements. You might also do Roth conversions each year to set up potential tax-free income in retirement.

Who Is This Calculator For?

This calculator is designed for those who want to see if they’re reasonably on track for an early retirement. It’s a fairly quick and easy checkup.

There are more robust and detailed calculators out there. If you’re into spreadsheets and you’re a passionate early-retirement enthusiast, you’ve probably run across those. This calculator might be underwhelming compared to those alternatives, but again, it’s for the audience that wants some information without picking apart each assumption.

Naturally, I have more powerful tools that I use with clients, and you may have other tools you enjoy. Hopefully, this provides some useful guidance.

What About Taxes?

Remember that this calculator does not account for taxes and many other unknowns. If you want to simulate some tax liability, consider increasing the income needed by an appropriate amount. Many retirees pay at effective rates of 15%, 10%, or even less. Those with high incomes pay more.

Tip: To increase your spending need by 15%, multiply the amount you need by 1.15 (the link takes you to a quick Google calculator).

Want More?

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Work in Progress

The calculator is continually improving. Please let me know if you have suggestions for features.

Who Is Behind This?

Justin Pritchard, CFP®, MBA, RMA®

  • Online meetings available in most states
  • Based in Montrose, CO, and serving clients nationwide
  • A retirement-focused financial advisor
  • Fiduciary, fee-only advice
  • One-time and flat-fee options available
  • Optional asset management (you can DIY or hire it out)
Justin

Important Stuff

Calculator Assumptions

This calculator uses basic spreadsheet-style planning.

Investment returns and inflation are assumed to be flat throughout life. Your spending need and retirement income both grow at the assumed inflation rate.

We calculate the value needed at your retirement date to fund cash flows. One lump sum represents spending for the early years (before you begin income). The second lump sum would fund your reduced withdrawals later in life (after income begins). Combine those two numbers for the total amount needed at your retirement age.

Notes

You might notice that the amount you need seems to decline if you begin income earlier. So, why not just do that in every case?

There are multiple complications that might point toward delaying Social Security benefits. Remember that this assumes flat investment returns and inflation, which will not end up being accurate. Taxes and tax planning strategies may not be reflected here.

Usage Risks

While believed to be reasonably sound, this calculator—like all calculators—is not perfect. There is no guarantee that the calculations can help you determine an amount sufficient to satisfy your needs and wants. There are a LOT of assumptions in here. Some may be invalid or not applicable to you. Inaccuracies and calculation errors may exist in this calculator, and they can produce bad results that may have serious adverse consequences. Please complete more robust calculations with a financial planner.

This assumes flat returns every year, and that you never lose money. That’s not likely to happen. Plus, it ignores taxes, RMDs, health care costs, and other things.

Speak with a financial planner for individualized advice. This is just for ballpark estimates. This is not individualized advice. It’s just a (hopefully accurate) oversimplified start on something very complicated.