Planning your retirement party for age 65 just like everyone else? Why not beat them to the punch? Why not retire at 60? Most people laugh at the idea and think they’re lucky to retire at 65, but the fact is, early retirement is a real possibility for anyone who has the discipline to reach their goals ahead of schedule. You don’t need to move heaven and earth to retire five years earlier than you planned. You need a better plan. 

Retiring a few years early means taking control over your finances and making good decisions about where you put your money and how you grow your wealth. Here’s how to retire by 60…

a happy couple after they could retire at 60 years old

Pay Off Debt and Start Growing Savings

If you want to learn how to retire early, get busy getting rid of your debt now. Many people are able to retire a few years early simply as the result of paying off their debts! Credit cards, auto loans, mortgages – any and all debts need to be your first priority. Every dollar toward debt is a dollar not going toward your retirement savings. 

Identify Your Retirement Goals

How much money do you need to retire at 60? Most people save for retirement without ever realizing how much they need to retire comfortably. As you start to plan for early retirement, consider how much you’ll need to live out the next 25-plus years of your life. 

Take your desired annual income and multiply it by 25 (or more) to get the figure for what your retirement savings need to be. For example, if you want to retire at 60 on an annual salary of $50,000, you’ll need $1.25 million. Then, look at the balance of your investment accounts today and subtract that figure from your retirement goal. That’s the gap you need to bridge to retire by 60. 

Optimize Your Investment Vehicles

With no debt and clear goals, your next step is to optimize your investments. Are you maxing out your 401(k)? Is your Roth IRA diversified? Is it time to rebalance your investment portfolio in favor of value stocks vs. growth stocks?

You want to pour as much as you can into your investments and reap the benefits of compound interest. Even a few thousand dollars extra each year can make a huge difference. Let’s say you’re 50. You’ve got 10 years to make the most of your portfolio. Look at the difference an extra $10,000 per year makes:

  • An additional $100,000 over the course of a decade
  • An additional $236,736 at a 9% annualized growth rate
  • An additional $283,942 at an 11% annualized growth rate.

To see how your savings can grow, check out our free investment calculator.

Add this to whatever your retirement balance already is and it’s a huge stride toward early retirement. 

Be Smart and Stay Financially Lean

Whether you’re 30, 40 or 50, the key to retiring at 60 is self-control. Stay smart about your finances and save much more than you spend. The more you can put away and the more frequently you do it, the greater your wealth accumulation will be. Set a budget and keep to it. Avoid extraneous purchases. Get maximum return from your investments like cars and houses. Remember that retiring early means delaying gratification… but also getting it sooner.

Here’s How to Retire at 60

Want a practical example of what retirement at 60 looks like? Here’s how someone who’s 45 might take to the task of shaving five years off their retirement target date:

Lewis is 45 with no debt and an annual income of $100,000. His employer-match 401(k) already has $250,000 in it. Over the next 15 years, he’s going to max out his 401(k) and put the $1,300 he was spending on a mortgage payment into an S&P 500 index fund. His retirement savings goal is $1.8 million.

Over the next 15 years, Lewis’ 401(k) grows to $1.5 million at an annualized growth rate of 9%. Meanwhile, his index fund grows to another $450,000. Altogether, he has $1.9 million – enough to retire comfortably. 

Shaving even five years off your retirement to retire by 60 is a great accomplishment. It’s something you can and should shoot for. Follow these tips to make it happen.

Retiring at 60 is still considered early for many people, but it’s possible with the right plan. Think you can do better? Read our article on how to retire at 40 and see whether it’s possible for you.

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