Ongoing costs
Since living off savings in early retirement is an ongoing monthly cost, your estimate weighs the monthly spending you enter, plus coverage you'd need to replace like health insurance, against your income and any existing debt, showing how much room it would leave in your budget.
These key factors affect early retirement affordability
The 4% rule and your number
A common rule of thumb, the 4% rule, says you can withdraw about 4% of your portfolio annually with a relatively low risk of running out of money, meaning $5,000 a month in spending, or $60,000 a year, implies needing roughly $1.5 million invested before you stop working.
Health insurance before Medicare
Retiring before 65 means losing employer coverage and Medicare eligibility, so a marketplace health plan, commonly $500 to $800 a month for a couple depending on age and state, is a real and often underestimated cost, which is why this calculator adds it as a separate $650 monthly line.
Sequence of returns risk
Retiring early means your savings need to survive a longer withdrawal period, and a market downturn in the first few years of retirement can permanently damage a portfolio's longevity even if long-term average returns are fine, which is why many early retirees keep one to two years of expenses in cash to avoid selling investments during a downturn.
How to use your results
- A green result suggests your planned spending level looks sustainable against your income and savings picture.
- A yellow or red result is worth pairing with a check of your actual portfolio size against the 4% rule, not just your monthly spending target.
- Include health insurance before Medicare even if you expect to work part-time in early retirement, since coverage gaps are a common surprise cost.
- Recheck the estimate as you get closer to your target date, since healthcare and living costs tend to shift in the final years of planning.
Ways to make early retirement more affordable
- Build a cash buffer of one to two years of expenses so you're not forced to sell investments during a market downturn early in retirement.
- Consider a bridge strategy, like part-time or consulting income for a few years, to reduce how much you need to withdraw from savings before full retirement age.
- Shop ACA marketplace plans carefully, since subsidies can significantly lower the health insurance line depending on your reported income in retirement.
- Delay claiming Social Security until closer to 70 if feasible, since each year of delay past full retirement age increases your eventual monthly benefit by about 8%.
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