Retirement Planning

Can I Retire at 50?

Happy Couple Enjoying Life

Disclaimer: This is a guide and does not replace seeking professional financial advice.

Are you dreaming of an early retirement?

The idea of calling it quits at 50 and spending the next few decades on your own terms appeals to many. You’ll still need money to live though, which means early retirement requires lots of planning, smart investing, and lifestyle adjustments.

Let’s explore the essential steps and considerations to help you decide if retiring at 50 is a realistic and achievable goal for you.

 

 Quick Links

  1. Why retire at 50?
  2. How much do I need to retire at 50?
  3. How to build a lasting retirement fund
  4. Health & lifestyle considerations for retiring at 50
  5. 4 steps to reach your retirement goal by 50

Why retire at 50?

Many people dream of early retirement for the freedom it offers to pursue passions, hobbies, and a lifestyle centred around personal well-being.

Leaving the workforce early often allows retirees to escape high-stress jobs, avoid burnout, and invest more time in activities that bring them joy and fulfillment. This could mean exploring creative outlets, traveling the world, or simply spending more time with family and loved ones – things that a demanding job may have previously limited.

For others, the motivation comes from a desire to lead a simpler, healthier life, free from the daily grind.

 

How much do I need to retire at 50?

Whether you can retire at 50 is ‘actually’ a million-dollar question… Perhaps, you might even need more than a million.

Many experts suggest saving about six times one’s salary by age 50, though how much you’ll need will depend on your life expectancy, inflation, lifestyle goals and health care needs.

 

Determine annual living expenses

One of the first steps in planning for an early retirement is to determine your annual living expenses.

Start by calculating necessary costs such as housing, utilities, food, transportation, insurance, and healthcare. Then, factor in discretionary spending, like dining out, entertainment, travel and hobbies that contribute to your quality of life.

Next, envisage your retirement lifestyle. Will it be modest, with a smaller home, used car, and fewer vacations?

Or will it be a more comfortable lifestyle, with a larger home, new car, frequent travel, and more leisure activities? A modest lifestyle may require a smaller budget, while a comfortable one will demand greater savings.

It’s crucial to be realistic about your expectations and plan accordingly.

 

Plan around your withdrawal strategy

To work out how much you’ll need to retire comfortably, you’ll first need to work out your financial independence number, which you’ll often see referred to as an ‘FI number’ for short.

The rule of 25

Your FI number is calculated on several factors including your current expenses, retirement lifestyle goals, inflation, and life expectancy.

To work it out, a commonly used rule of thumb is the 25 x Rule. This is where you estimate your annual retirement expenses and multiply them by 25.

If you’re aged 50 and intend to spend $40,000 per year in retirement you would need $1 million saved ($40,000 x 25).

However, given Australia’s average life expectancy for men aged 65 in 2020-2022 was 85.2 years and for women it was 87.8 years, $1 million is probably not going to be enough if you’re retiring at 50 and want to live on $40,000 a year.

There are ways to boost your income though, such as through investments.

The 4% rule

One such method to increase your retirement income is the widely known 4% rule.

This rule of thumb suggests that you can withdraw 4% of your retirement savings annually without running out of money for at least 30 years. For example, if you have $1 million saved, you could safely withdraw $40,000 in the first year of retirement.

After the first year, you’d adjust the withdrawal amount each year for inflation. As with every strategy, there are pros and cons though.

The main benefit of the 4% rule is its simplicity and solid mathematical foundation. In a thriving economy, some experts argue that 4% is overly cautious, suggesting that retirees could safely withdraw seven percent annually, or even up to 15%, without significant risk.

However, the opposite holds true during economic downturns. Another limitation of the 4% rule is that it doesn’t consider how spending habits change over time. Younger retirees often spend more on travel and experiences, while older retirees tend to have higher healthcare costs.

Therefore, it’s essential to evaluate your unique financial situation and personal goals before committing to a specific withdrawal strategy.

A reputable financial advisor can provide guidance on your personal needs, taking into account factors such as life expectancy, unexpected expenses, and your risk tolerance. Diversifying your withdrawal strategies and including other income sources can offer additional security and peace of mind as you enjoy your retirement years.

Couple over 50s meeting with a trusted financial advisor

 

How to build a lasting retirement fund

Obviously, retiring at 50 is a lot different to retiring at 65.

Careful retirement planning and disciplined savings habits are needed to ensure your retirement fund lasts the distance. Starting early is crucial, as it allows your investments to grow and compound over time. However, even if you begin saving later in life, there are still effective strategies to ensure you have enough funds for a comfortable retirement.

Here are some ways to build a lasting retirement fund:

 

Calculate for inflation and market volatility

Inflation-proofing your retirement savings and preparing for market downturns are crucial steps for financial security.

Here’s why and how to address these challenges:

Inflation erodes the purchasing power of your savings over time, meaning that fixed incomes may struggle to keep pace with rising costs. For example, at a 3.5 percent annual inflation rate, the value of a $500,000 nest egg could decline significantly in just a decade.

To counteract this, strategies like diversifying investments into growth assets (e.g., shares or inflation-protected bonds) can help savings grow faster than inflation​.

 

Preparing for market downturns is crucial. Withdrawing from savings during market dips, can permanently deplete funds. To mitigate this, consider adjusting withdrawal rates by being flexible with spending during market slumps to preserve principal investments.

Additionally, holding a diversified portfolio with a mix of asset classes can stabilise returns over time. Building a cash reserve is also advisable as it can cover short-term expenses without the need to sell investments at a loss.

  • Professional guidance

Regularly consulting a financial adviser can help you proactively adjust your strategies based on inflation, market conditions, and personal goals to ensure your retirement plan remains resilient.

 

Develop passive income sources

Developing passive income streams is a way to bolster your retirement savings, which offers you financial security and reduces reliance on your savings alone.

Effective strategies might include dividend-paying stocks, exchange-traded funds (ETFs) and managed funds, royalties from intellectual property (like music, books or digital content), commercial ventures and licensing and fixed-income investments. Purchasing annuities ensures regular payments over a set period, which provides a predictable income for retirees. [[link to: ]]

Property investment is another popular strategy in Australia. Investing in rental properties can provide a steady stream of passive income, and the capital growth potential can significantly boost your retirement savings over time.

Just be mindful of property market conditions and the responsibilities that come with being a landlord. And recognise that real estate is an investment that may takes week, if not months, to turn into cash. In addition to steady passive income streams, you might also want to consider doing things that interest you to generate more money in your semi-retirement or retirement.

 

The Women’s Weekly released the following list that include ideas of:

  • Tutoring
  • Consulting, especially if you have industry contacts and expertise from your previous career
  • Freelance writing or photography (websites like Upwork, Fiverr and Pixpa can be a place for this)
  • Pet sitting and dog walking (websites like MadPaws and Pawshake can help with this)
  • House-sitting
  • Gardening and home maintenance
  • Selling plants, flowers or craft items you make (i.e. pottery, knitware)
  • Cleaning
  • Bookkeeping
  • Driving and/or deliveries (think Uber and MenuLog)
  • Second-hand sales and/or flipping items.

 

Leverage tax benefits

An effective strategy is to take full advantage of superannuation – the cornerstone of retirement savings.

By making additional concessional (before-tax) and non-concessional (after-tax) contributions to your superannuation fund, you can significantly increase your retirement nest egg. The Australian Government also provides tax incentives for these contributions, making it a highly beneficial strategy.

Understanding the eligibility criteria and how much you might receive can help you plan your retirement more effectively. Additionally, consolidating your superannuation accounts can reduce fees and make it easier to manage your retirement savings.

 

Happy couple at a dinner party.

Health & lifestyle considerations for retiring at 50

Retiring at 50 needs to involve careful consideration of both health and lifestyle factors to ensure a fulfilling and sustainable retirement. Here are some of the key considerations to plan for a healthy and active lifestyle during a longer retirement:

Create a healthcare and emergency fund

Early retirees need to account for potentially higher health care expenses as they age.

Medicare – Australia’s universal health insurance scheme – provides a safety net, however private health insurance can offer greater flexibility and shorter treatment wait times. It also helps to have a health care emergency fund, which you can only dip into for unexpected health emergencies.

A good target is to have enough in your emergency fund to cover three months of expenses, however when preparing for an early retirement, it’s worth having a lot more put aside.

 

Physical and mental wellbeing

Staying active and maintaining a healthy lifestyle are critical for maintaining emotional and physical health. How you maintain exercise and your social connections should be part of your plans for early retirement.

Learn more about how to stay fit over 50 here.

 

Lifestyle adjustments

While early retirement offers flexibility, changes occur to daily routines and finances.

Understanding whether you’re after a modest or comfortable lifestyle will ensure the budget matches accordingly. Leaving the workplace can also lead to reduced social interactions so building networks through community activities like volunteering, working part-time or taking on new hobbies/education can bring fulfillment.

 

4 steps to reach your retirement goal by 50

With the right preparation, you can make the dream of retiring at 50 a reality—allowing you to spend the rest of your life on your terms.

Here are four steps that might help you on your savings and passive income journey.

 

1. Save and invest wisely

If you are asking ‘can I retire at 50’ here are some strategies (of course consult your financial adviser to help decide what is best for you and your circumstances):

 

  1. Maximise superannuation contribution and concessions: Superannuation (super) is a tax-advantaged Australian retirement savings, and making the most of it can significantly boost your retirement funds.

 Contribute up to the annual concessional and non-concessional caps, taking advantage of employer contributions and tax-deductible personal contributions. This not only reduces taxable income but also allows super to grow faster over time.

Keep in mind that superannuation funds are typically inaccessible until preservation age, so you may also need non-super assets to bridge the gap.

 

  1. Build a diversified investment portfolio outside of super: Since superannuation is inaccessible until the preservation age, having investments outside of super is crucial for those looking to retire early.

 Focus on creating a diversified portfolio of growth assets like stocks, exchange-traded funds (ETFs), and real estate, which can provide capital appreciation and income over time. ETFs are a popular choice, offering low-cost access to a range of markets.

You may consider growth-focused investments in your earlier years, gradually shifting toward lower-risk assets as retirement nears.

 

  1. Control spending and increase your savings rate: Achieving early retirement requires a high savings rate, which means managing expenses and living within your means.

 Start by creating a detailed budget and identifying discretionary expenses you can reduce or eliminate. Consider lifestyle changes like downsizing your home, reducing debt, or adopting a more minimalist approach to avoid overspending.

Redirecting these savings into your investments will accelerate your journey to financial independence, ensuring you have enough to retire comfortably by 50.

2. Get rid of debt

Reducing debt is essential if you want to retire early. Here are three strategies to help eliminate debt effectively.

  1. Prioritise high-interest debts first: Start by focusing on paying off high-interest debts, such as credit cards and personal loans, as they can quickly erode your savings with compounding interest.

Use either the debt avalanche method (paying off debts from highest to lowest interest rate) or the debt snowball method (paying off smaller balances first for quick wins) to stay motivated. Redirecting any extra funds towards these debts helps you reduce the amount paid in interest over time.

 

  1. Consolidate and refinance loans: Consolidating debts into a single loan with a lower interest rate can simplify payments and reduce interest costs.

Refinancing mortgages, student loans, or car loans at lower rates can free up cash flow, which you can redirect toward investments. When refinancing, ensure that the fees don’t outweigh the savings, and avoid extending the loan term, which could slow down your debt-reduction progress.

 

  1. Adopt a frugal lifestyle and increase repayments: Cutting down on non-essential expenses and adopting a more frugal lifestyle allows you to channel additional funds into debt repayments. Create a detailed budget, limit discretionary spending, and consider adopting minimalism to keep your spending aligned with your financial goals.

Use any surplus income—like bonuses, tax returns, or pay raises—to make extra repayments, helping you pay down debt faster and save on interest in the long term.

Downsize, declutter and donate

3. Downsize

Downsizing can help streamline your financial position and free up capital for retirement. Here are three strategies to make downsizing work effectively:

  1. Sell and move to a smaller or more affordable home: Selling your primary residence and purchasing a smaller or less expensive home can free up significant equity.

 This approach can reduce living expenses, including maintenance and utilities, allowing you to allocate more funds toward retirement savings or investments.

 

  1. Use proceeds from downsizing to boost superannuation: Are you sure you want to retire at 50? If you’re over 55, the Australian government allows eligible individuals to contribute up to $300,000 from the proceeds of downsizing into superannuation under the downsizer contribution scheme.

 This can provide a substantial boost to your retirement fund, benefiting from superannuation’s tax-advantaged growth. Before making this decision, ensure you understand the super contribution caps and how it might impact your Age Pension eligibility.

 

  1. Declutter and sell unused assets: Downsizing doesn’t just apply to housing; it also includes lifestyle adjustments. Simplifying and decluttering can help you live more minimally while potentially adding to your finances if you sell some items.

 

4. Set up a contingency plan

Setting up a contingency plan is essential in case you don’t meet your income goals by 50. Here are three ways to create a backup strategy:

 

  1. Plan for part-time or flexible work options: Working even a few days a week can provide supplemental income, allowing your investments to continue growing while covering necessary expenses. Choosing flexible, remote, or seasonal roles can give you the freedom to maintain a semi-retired lifestyle while ensuring a steady income stream.

 

  1. Reevaluate your retirement budget and lifestyle: Assess your retirement budget and look for areas where you could reduce costs if needed. Consider downsizing further, relocating, or cutting non-essential expenses to lower your overall budget. Creating a leaner version of your retirement budget can give you a clear sense of what adjustments are possible, allowing you to stretch your existing funds if necessary.

 

  1. Build a cash buffer and emergency fund: Having a cash reserve can provide a cushion in case of unexpected expenses, giving you peace of mind and time to adjust if your retirement income falls short.

 

Find financial freedom with GemLife over 50s resorts

Retiring at 50 is a significant achievement, and while it’s within reach for some, it requires careful planning, disciplined saving, and a clear understanding of your retirement needs. It’s a balance of smart financial strategies and lifestyle adjustments that can make early retirement both feasible and enjoyable.

GemLife over-50s resorts are designed to support active lifestyles and provide flexibility for residents who may still be working or full- or part-time, to those who are fully retired. Unlike traditional retirement villages, land lease communities like GemLife offer transparent financial structures whereby homeowners own their own home, and simply lease the land it’s on.

There are no complicated entry, exit or capital gains fees, and homeowners enjoy social, leisure and sporting facilities on their doorstep. First-class amenities include ten-pin bowling, heated swimming pool and spa, cinema, sports courts, residents’ workshop, and more.

Contact GemLife today for more information or to request an information pack.