7 Savings tips to retire early.
Key takeaways:
- Estimate how much you’ll need to retire early by understanding your spending and how long your savings must last.
- It takes careful planning to build a nest egg large enough to support decades without a steady paycheck.
- Review your retirement plan every year to stay on track as your goals and life circumstances change.
Early retirement isn't reserved for lottery winners. With intentional planning and consistent habits, you can position yourself to leave the workforce on your terms — whether that's at 50, 60, or whenever it feels right for you. The key is building a nest egg large enough to support decades without a steady paycheck.
These seven tips can help you create a solid plan for retiring ahead of schedule:
1. Calculate your retirement number.
Your “retirement number” is an estimate of how much you’ll need to cover your expenses once your paycheck stops. A common starting point is to total your annual spending by adding up all your monthly expenditures on housing (including utilities), food, transportation, healthcare and fun, and then multiplying that number by 12. Then, multiply your annual spending number by 25 to get your “retirement number,” which assumes a twenty-five year retirement.
“That calculation can be a helpful baseline, but it’s rarely the final answer,” says Sam Toigo, assistant vice president and financial planner at Commerce Trust. “If you expect to retire early, you may need to increase that figure to account for a longer retirement, rising healthcare costs, inflation, and the impact of taxes over time.”
For example, if you spend $40,000 a year, you might aim for at least $1 million saved to help account for a longer retirement and rising costs. This approach is based on a commonly cited guideline that suggests withdrawing around 4% of savings annually over a long retirement period. It’s intended as a planning framework—not a guarantee of future results.
2. Pay off high-interest debt.
High-interest debt includes credit cards and personal loans that charge high rates. These balances cost you more in interest charges than your savings typically earn. Paying them off frees up money that can go straight into retirement savings.
To get started, list your debts by interest rate and focus extra payments on the highest one first. Once that balance is gone, move to the next one until you are debt-free. Eliminating debt gives you flexibility and peace of mind as you work toward your goal.
3. Boost your savings rate.
Your savings rate is the portion of each paycheck you set aside for the future. For example, if you take home $5,000 a month and save $1,000, your savings rate is 20% ($1,000 ÷ $5,000). Start with what you can comfortably manage and build from there. If you increase it a little each year, you could reach your retirement number sooner.
| Monthly Take-Home Pay | 10% Savings Rate | 20% Savings Rate | 30% Savings Rate |
|---|---|---|---|
| $3,000 | $300 | $600 | $900 |
| $4,000 | $400 | $800 | $1,200 |
| $5,000 | $500 | $1,000 | $1,500 |
| $7,000 | $700 | $1,400 | $2,100 |
| $10,000 | $1,000 | $2,000 | $3,000 |
Scan your budget for extra money you can redirect toward your goal. Then, set up automatic transfers so saving happens without much effort. This approach is often referred to as “paying yourself first,” because you prioritize your future before spending on anything else. Give your account balance a boost whenever you get a workplace bonus or tax refund. Consider putting half of it toward retirement before spending it on anything else.
Remember to balance saving for the future with enjoying life today. For example, putting all your spare cash toward your early retirement goal might push you to charge fun activities on high-interest rate credit cards. That adds stress now and could delay your retirement plans.
4. Deposit money in retirement accounts.
Regular savings accounts can help you grow your emergency fund or save for big purchases. However, they are not ideal for retirement savings since they lack certain long-term growth benefits. Consider opening and making regular deposits into a designated retirement account, such as a 401(k) opens in a new window, individual retirement account (IRA) opens in a new window, or Roth IRA opens in a new window.
A 401(k) is a retirement account offered through your employer. Traditional IRAs and Roth IRAs are ones you open on your own. These accounts can be funded with pre-tax dollars, or in the case of a Roth account, after tax funds. All can help your money grow faster because you don't pay taxes until the money is withdrawn. That allows more of your money to stay invested and grow over time.
“You may also consider a taxable investment account,” says Toigo. “A taxable investment account is funded with after-tax dollars and the earnings in that account are taxed in the year they are realized. These accounts do not have age restrictions on when funds can be withdrawn, so they can act as a bridge in the early years of retirement to tide you over until you are eligible to start accessing some of your retirement account funds.
5. Invest for long-term growth.
In conjunction with contributing to retirement and taxable investment accounts, you can also invest directly in stocks, bonds or mutual funds. The key is choosing a mix that matches your comfort with risk and your savings timeline. Younger savers can often handle more risk because they have years to recover from market dips. As you get closer to retirement, shifting toward lower-risk options helps protect what you've built.
6. Plan for healthcare costs.
Healthcare is one of the biggest expenses in retirement. This might be especially true if you stop working before Medicare opens in a new window starts at age 65. You may need to buy your own health insurance to fill the gap. This can cost several hundred dollars to well over $1,000 each month opens in a new window, depending on multiple factors including your age, where you live, and the plan you select.
Research your options early so you're not caught off guard. Some employers offer retiree health benefits. The health insurance marketplace opens in a new window also provides coverage for people who retire early. Building healthcare costs into your retirement number helps you avoid surprises later.
7. Review your plan yearly.
An annual review is a scheduled check-in where you look at your progress and adjust if needed. “Sitting down together lets us help you assess where you are, identify any obstacles, and figure out how to adjust to keep you on track to meet your goals,” says Toigo. Life changes like raises, new jobs, growing families, or health shifts can all affect your savings needs. Each year, compare your savings to your target. Update your retirement number if your expenses have changed. Staying flexible lets you adapt without losing sight of your goal.
Early retirement is achievable when you build consistent habits and stay flexible with your plan. Talk with a Commerce Banker who can help you build a personalized plan that fits your goals and lifestyle.
Disclosures:
The opinions and other information in the commentary are provided as of 01/30/26. This summary is intended to provide general information only and may be of value to the reader and audience.
This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such.
Commerce Trust does not provide advice relating to rolling over retirement accounts.
Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Commerce Trust is a division of Commerce Bank.
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