Can You Retire Early If You Started Late?

Can you retire early if you started late?It’s best to start saving in your 20s if you want to retire early, but life isn’t perfect. Many people didn’t save much in their 20s or 30s due to a variety of reasons. Some have low income. Some spend too much or take on a lot of debt. Stay-at-home parents rarely have income while they take care of the family. Some people got divorced and had to start over. The student loan is another big problem nowadays. Lots of young folks now start out with a big negative net worth. Lastly, most people don’t understand personal finance and rarely consider saving for retirement when they’re young. It’s rarely easy to save when you’re young.

What if you discovered FIRE (financial independence retire early) in your 40s or 50s? Is it possible to retire early if you started late? To me, early retirement means retiring before you turn 60 so there is still time. It will be more difficult because compound interest works best when you’re young, but older savers have a lot of advantages too.

Early retirement is easier for older workers

In fact, I think early retirement is easier for older workers. Why? Here are some of their advantages.

Less time in retirement

I retired when I was 38. That means I could have 50+ years in retirement. I need more savings to fund my long retirement. Instead of going straight into full retirement, I choose to blog part-time and slowly ease into it. My wife is also still working full-time. She plans to retire early too, but she’s not quite ready yet. This means we can put off withdrawal until later. Meanwhile, we’re building our passive income and it should surpass our spending by the time Mrs. RB40 retires. You can read more about our unusual retirement withdrawal plan here. Older workers won’t have to plan for such a long retirement like that.

Retirement benefit coming sooner

I still have 20 years left until I start receiving Medicare and Social Security benefit at 65. For older workers, this gap is much smaller. If someone retires at 60, there are just 5 years left until they can start receiving these benefits. They only need to figure out how to bridge these 5-10 years gap instead of 20+ years. In particular, healthcare is a big problem for Americans. Many of us choose to work longer just for employer-subsidized health insurance.

You don’t need to be too conservative

I think early retirees in their 30s and 40s need to be much more conservative. There are many uncertainties in the longer retirement period. My main financial goal is to generate enough passive income to pay for our cost of living. That’s quite difficult. For older savers, I don’t think they need to do this. Their goal should be less conservative. They can go with the 4% safe withdrawal rate. This rule of thumb says you can withdraw 4% of your asset and it should work over 30 years of retirement. Your net worth will drop over time, but it should be enough.

Trying to achieve 100% FI ratio translates to around 2-2.5% withdrawal rate for us. Young retirees need to save more so we can put off depleting our retirement savings until we’re older. Or work part-time to put off withdrawal.

Less uncertainty

There is a lot of uncertainty in the future. The longer out, the more unknown we’ll have. For example, Social Security will be there for you if you’re 55. They aren’t going to change the rule on you. Even for me (45,) I think Social Security will be mostly unchanged. However, there probably will be some changes for people in their 20s. The income cap will most likely increase and the retirement age might be pushed out. They’ll have to fix Social Security at some point.

The stock market and other investments are also uncertain. For me and older savers, we already benefited from years of investment gains. The younger folks might not have this benefit. There are just a lot less uncertainty if you’re older. It’s easier to do the calculation. You pretty much know what to expect in retirement if you’re 55.

Less family obligation

Older workers generally have less family obligation than people in their 30s and 40s. We have a son and he is still in grade school. It will take at least 10 more years before he goes to college and starts his own life. Our parents are all getting older and they need more help. Life is most stressful in your 40s. There are too many things on our plate at this age.

For older workers, life should become less stressful. Hopefully, the kids are out of the house and get on with their own lives. It might be possible to downsize or move somewhere more affordable at that point. You have more freedom to change.

More solid finance

This one is different for everyone, of course. For younger folks, their net worth is usually very low when they discover FIRE. It will be a very long journey for even the most frugal 22-year-old new college graduate. At 50, you should be way ahead of most young people. Hopefully, you’ve been saving for a while and have some home equity. These assets will help ease the path to early retirement.

Case study

One of our readers, Liz, asked – can she retire early if she started saving late? This post is for her and other older workers who started saving late. Let’s see if we can help her. Here is Liz’s info.

  • Age: 52
  • Family: Single. Kids are out.
  • Income: $60,000/year
  • Debt: $30,000 (HELOC)
  • Savings: $100,000 in retirement accounts. $52,000 in work pension.
  • Home: $350,000 in home equity. No mortgage, just the HELOC.
  • Healthcare: Liz is Canadian so she doesn’t have to worry much about healthcare.

Currently, she saves about 25% of her income, uses 25% to pay down the debt, and spends the rest. Her debt should be gone in less than 3 years. It looks like she spends about $30,000 per year and she is happy with that.

Future income

  • Pension: Liz could receive up to $9,600 per year if she retires at 65. However, she doesn’t want to work that long. She will receive less if she retires earlier. I’ll just have to make some estimates here.
  • CPP: Canada Pension Plan. This is similar to Social Security in the US. Liz will receive about $5,000 per year from CPP if she starts at 60.
  • OAS and GIS: Old Age Security and Guaranteed Income Supplement. These are Canada’s pension program for seniors age 65 and older. She will probably receive about $9,000 annually from these.


Liz is content with her current lifestyle. She lives modestly and isn’t too interested in travel. Her biggest goal is to continue to live in her modest bungalow until she’s around 70 years old.

Crunch the numbers

It looks like Liz is on track for regular retirement. She has some retirement savings and will be able to ramp it up once the HELOC is paid off. Her cost of living is also relatively low and she has no mortgage. It looks like she will be in good shape if she retires at 65. However, it is a lot more uncertain if she wants to retire early.

Her expense is relatively low at $30,000 per year, but she still needs to fund that somehow. Also, her future income will drop if she retires early (pension and CPP.)

Retire at 65

I put her numbers into the Personal Capital’s Retirement Planner. As I expected, it looks good if she retires at 65.

Retire 65

She will have time to build up her retirement savings and her retirement benefits will be larger. The 2nd big bump is when she sells her house at 70. This looks good.

Retire at 60

Unfortunately, it doesn’t look as solid if she retires at 60 according to the Retirement Planner.

retire 60

I assume her work pension will be about $4,000 per year if she retires at 60.

Working until 60 will give her time to build up her retirement savings to about $250,000 to $300,000. That’s a better amount than what she has now. After she retires at 60, her savings will deplete steadily until she sells her home. This will give her savings a big bump, but the withdrawal rate will be even steeper afterward. That’s because she’ll probably pay more for housing. I estimate an additional $16,000 per year which is really low.

IMO, this chart doesn’t look too bad. Liz can make some minor adjustment and she would be okay. For example, if she drops her spending about 10%, the graph will look much better. That’s not a huge change. Another big variable is her house. If the housing market continues to do well, she might be able to sell it for quite a bit more than we estimated. That’s uncertain, though.

Retire at 57

Liz mentioned that she’d like to retire soon after she paid off her debt if that’s possible. However, it doesn’t look good at all.

Retire 57

5 years isn’t quite enough time to build up her savings. Also, her pension income will be less, around $3,000 per year.

Her retirement savings won’t be enough to support her current lifestyle for long. It will run out by the time she is 65. At that point, OAS and GIS will kick in, but they still won’t be enough.

If Liz really needs to retire at 57, then she will need to be more creative.

Work part-time after early retirement?

A good option is to work part-time after she retires at 57. A little active income goes a long way in retirement. Here, I added $15,000 per year in part-time work for 10 years after she retires. This improves the projection tremendously.

work part time after early retirement

The tail end of this chart still doesn’t look great, though. Liz probably will have to cut back a bit to stretch out her savings.

My recommendation

Liz is on the right track and I’m pretty sure she can retire before 65.

I suggest she works for 5 more years and then evaluate her retirement plan again. At that point, the picture should be much clearer.

I think she will be able to retire at 57 if she can work part-time for a while. Otherwise, it’s probably best to continue working until she’s 60.

For now, stay on track and keep saving.

Lastly, I think Liz should check with CPP about her retirement benefit. She was a stay-at-home mom for many years so she didn’t have much income during that time. Can she get a spousal benefit or something like that?

Mrs. RB40’s mom doesn’t qualify for Social Security benefit by herself, but she got a spousal benefit. Canada must have something similar. Check it out.

Here are CPP’s Child-rearing provisions. This might help Liz increase her CPP benefits. Thanks, Tigermom for sending us this link.

Liz’s questions

Q: How much should someone my age have saved?  How far behind am I? 

A: Liz is ahead of the average American household, but that’s not saying much. Americans are horrible at saving for retirement. I think she is a bit behind the average Canadian households, but not by much. If she focuses on saving and investing, she should be in good shape by the time she retires. The great advantage she has is that her house is paid off.

Generally, someone her age should have 4-6 times their annual salary saved up. That’s about $300,000 at her current salary. She’s in the ballpark if you count home equity.

Q: What can I do to increase the profits on my investments without really risking the money I have invested?  Should people close to retirement have any risky investments?  

A: This one is tough. If I was in her position, I would be relatively conservative. I’d invest in index funds and target the allocation split to 70/30, stock/bond. As retirement gets closer, I’d put more in bond. Maybe 60/40? Liz may need to talk to a good financial planner if she needs more help with this.

Q: Is there any hope of me retiring before age 65?  Is there any hope for early retirement?  

A: I think Liz has a good chance at early retirement. It looks like she can retire at 60 with just some minor adjustment. Maybe at 57 if she is willing to work part-time for a bit.

Q: I would like to retire when my debt is paid off in 3 years.  Any chance that might happen?

I don’t think that’s a good idea. That’s just 3 years away and she won’t have enough time to build up her retirement fund. I don’t think it’s going to work unless she receives a big windfall or something like that. I think retiring around 57 to 60 is much more realistic.

Okay, that’s it from me. I’d like to thank Liz for sharing her numbers! All in all, it is quite possible to retire early if you started late. I think retiring around 60 is quite good. That’s still young as long as you’re healthy.

Do you think it’s possible to retire early if you started late? Do you have any advice for Liz?

*Sign up for a free account at Personal Capital to help manage your net worth and investment accounts. Their Retirement Planner is great. It’s flexible enough to take all sorts of input like in Liz’s case above. It’s a very helpful starting point for retirement planning. Check them out if you don’t have an account yet.

Image by Rosemary Ketchum

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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50 thoughts on “Can You Retire Early If You Started Late?”

  1. Nice article ! From an European and in this case Portuguese view i could consider i’m an early starter and while statictics are not abundant (and even a bit Tabu around here…) my gut feeling tells me that for the needed income to live here (~1.5k monthly) you dont need to be starting as early as your 20’s and many 30 something (which seem to be the most frequent age people discover FIRE) could do it before the retirement age (65+), perhaps ~50’s. To contribute to this are many factors and while your income could be tricky to improve if you are not in a boosting field (IT – lucky me) you could definitly reduce costs by moving to the countryside lowering your cost of living in Portugal to ~1k per month per adult.

  2. It’s never too late to adjust your lifestyle or spending/saving habits, but it certainly does get harder. The markets and compounding has been our friend for many years, I worry it won’t be able to sustain at the same rates. That may throw a little bit more of a wrench in late starters.

  3. I really like this overview. We started late – early 40s. I look back at all the opportunities we missed and cringe about how much easier it could be now. But, on the positive side we are in our highest earning years and can put away large amounts of money quickly. I think that would be true in most careers (but not all) – a later start gives you more income to work with.
    You just have to crush that lifestyle inflation. We’re hoping to get there by 50 – but 52 is probably more likely.

    As you said, being closer to some of the retirement benefits makes it easier to start factoring those in. I wish we’d started earlier, but I’m glad we came across it when we did. I wish Liz luck!

    • Early 40s is still pretty good. It’s a great advantage to be at the peak of your earning years.
      It’s great to start saving in your 20s, but most of us didn’t make much back then.

  4. Hi Joe, I always love outside-the-box thinking, and this article was exactly that. I’m saving it to share with others who feel discouraged with their late start. So many good points you’ve shared here!

    PS I’d really like to join your email list for updates, but your form to do that is broken! Any chance you could add me manually? Thanks in advance. 🙂

  5. Great analysis Joe, I like that Liz is Canadian 🙂
    I think if Liz had zero saved up in retirement savings or a nest egg and was 52, then all the ‘pros’ of retiring early really outweigh the cons.

  6. It’s kind of a paradox, isn’t it? The later you start, the fewer years of retirement you have to save for. But on the other hand, you also don’t have as many years to let your retirement accounts compound.

    “The income cap will most likely increase and the retirement age might be pushed out. They’ll have to fix Social Security at some point.”

    I have a post in the works on this but, yes, the income cap is something they need to address.

      • It’s mind boggling that there’s a cap on a flat tax to begin with. Higher earners pay a lower effective Social Security tax than people living below the poverty line: and the more you earn, the lower your effective tax rate.

        Who thought that up?

  7. If she really wants to retire early at 57, she would probably need to sell the house and downsize. Buy a house for half the cost of her current house so would have $150,000 to $200,000 to add to her current investments. This would put her retirement savings at $350,000-$400,000. Then work part-time for a few years so her withdrawal rate is not as high. A smaller house usually also means less maintenance costs, lower utilities, lower insurance premiums, and lower property taxes. I think doing a combination of these two things would put her in a good position.

    • From what she told me, I don’t think that’s possible. She said she already lives in a modest home and doesn’t want to move.
      Housing is quite expensive now and moving to a smaller home might not even save her much.

  8. Hi Joe, This is a very complete analysis. You could be a professional retirement consultant. For Liz (and you mention this) find something you like to do in retirement to make some money. We all have to do something, so why not make some money at it since it can allow an earlier exit from the full-time grind. Tom

  9. There’s nothing wrong with retiring at 65 considering many Americans struggle to retire at normal age. If anything, her story probably sounds like that of the vast majority of retirees. I think freedom is the largest advantage older folks have. I’ve seen older engineers drive Uber once the kids move out to save more and retire earlier 🙂 Her numbers might improve a little bit if she’s willing to downsize or rent out a room in her house.

    • Exactly. Even retiring at 60 is really good.
      She said she already lives in a modest house and doesn’t want to move.
      Moving might not even help because a house is quite expensive these days.

  10. Very thoughtful analysis. I think the biggest thing to being able to retire early if you start late is how bad you want it. What’s your motivation and how will that drive you? What are you willing to sacrifice now for later? Anything is possible

    • I agree 100%. If you want it bad enough, you’ll find a way to do it.
      Liz could make some sacrifices if early retirement is her highest priority.
      However, life isn’t that simple. You have to balance your priorities.

  11. You bring up a great point on it being a little easier for older workers in early retirement in that they don’t need to save as much since they don’t need to live on it as long. That’s an incredible advantage if you’ve been saving a lot during your working years.

    I like the idea of Liz working part-time in her late 50’s. A thought might be to find something that she’s got a passion for now and start a side hustle now. She could then grow it into something to do in retirement and it might not seem like a job. She’s in a great position that she wouldn’t need to worry about healthcare when growing it either.

    — Jim

  12. Hi Joe, I like the idea “Early retirement is easier for older workers”, as it means less number of years of uncertainty. I still have 11+ years to go before hitting the age of 65. I look forward to getting the MediCare, but not excited about aging at all.

    As you said, it’s great if people could start saving for retirement in their 20s. I didn’t get started until my early 30s. I was working in China then. The pay was decent at the local level, but not much if converted to US $. After coming to US, I started all over again. It worked out pretty well at the end.

    • I don’t like aging either. There are just more issues as you age. It’s not fun.
      I think you’re doing it exactly right. You already saved and retired early. Going back to work for a bit to supplement your income is a great move. I’ll probably do the same whenever I need to.

  13. I guess another benefit of starting late is that the late starter already knows the type of lifestyle that would be satisfying and the cost associated with such a lifestyle. That way, the late starter have a better sense of how much of a nest egg is needed to support such a lifestyle.

    But I think it would be really hard for someone starting late to retire early unless that person comes upon a windfall or a one time financial event late in life. Otherwise, without the power of compounding, it is hard for any person to be able to save up enough of a nest egg to retire early unless the person makes drastic cost cutting changes to current life style.

    • You’re right. Young people think they’ll be happy being frugal, but you never know. You might not be satisfied with this lifestyle in 20 years. Liz has a tough road ahead, but at least it’s pretty short. In 5 to 10 years, she’ll be able to retire. That’s not too long in the grand scheme of things.

  14. PT work for Liz after retirement sounds like a good deal. Keep active and independent financially is a good hack to have your cake and eat it in my opinion. I sit for 1 dog and make $6000+ a year, and it’s the easiest side hustle ever.

    BTW, at first, I thought this a republish! I swear I read something like this involving another reader of yours named Liz (?) about possibly retiring later than usual FIRE but earlier than traditional retirement in your archives before O_O! I’m not crazy, I specifically remember reading about that one too.

    • That’s great. I’ll look into something like this when I’m older. House and pet sitting is such a cushy job and it pays well. It’s not a repost. I might have used “Liz” before. It’s not a real name. Sorry for the confusion! 🙂

  15. I’m getting a late start at 40. I’m significantly behind Liz in savings, so I don’t think I’ll be able to retire before 65. Maybe 70. It just depends on how much I can put away into my SEP-IRA now that I’m buckling down. I’ll be fine if I retire at 70, but I think it’d get iffy if I retire at 65.

    That said, I have health problems that keep me from being terribly active. So frankly I’d probably have too much time on my hands if I retired early. I already work from home, so there’s no hated commute or office politics. So overall, I’m okay waiting until the regular retirement age.

    • Just keep saving and investing. You still have a lot of time. I think you’ll be surprised in 10 years. Compounding works really well. You’ll probably have Social Security and other benefits too. I’m sure it’ll be easier than you think. Good luck!

  16. Having a late start is really tough. Especially given the time value of money.

    In many ways, doctors have a relatively late start with school, school debt, and residency as obstacles. However, we can make up for loss ground with a relatively higher income.

    I agree with your assessment of Liz’s financially look. She could potentially ease into early retirement by working part time or having a side hustle to supplement her income.

  17. I think another big upside to finding FIRE later (as long as you’ve been a “decent” saver throughout your life) is that you likely have a shorter timeline to retirement than us younger folks because you’ve been saving up money in the background without thinking about it.

    Good luck Liz! You’d be amazed at how much things can change in a year or two of focus as well.

  18. we had what i consider a late start too, but not as late as the case study. we really got after it when i was 35 and mrs. was 40 and in 15 years we had a ton of progress. the big advantage of being older is experience and the ability to keep a calm head when things don’t go as planned. at this point we’ve been seen a lot of the curveballs from life. that’s a tough situation for liz, though. there are not magic bullets for investment returns that can beat time in the markets.

    • I think anytime before 40 is pretty early. You’re right about keeping calm. Older savers have more experience and we usually handle the curveballs better. Shrug it off and keep going. Higher income helps a lot too.

  19. Anything is possible but becomes more improbable the later you start in life trying to retire early. You have to compensate for losing all those years of compound interest and thus go the “brute force” approach which is putting a considerable amount more of money each year.

    I had to do that because of my divorce at the age of 39 (month before 40) when I had to essentially start from ground zero (technically I was probably way less than $0). But a higher income allowed me to put large sums of money each year into the portfolio and has allowed me to get back on track for early retirement.

    Liz’s case is buoyed a lot by the pension. A lot of people don’t have that and it certainly helps to have that plus the Canadian version of Social security to establish a base income floor for retirement. But I agree with you that 3 yrs is just to little to give time for her assets to grow to support an early retirement.

  20. By later, I was thinking it was going to be starting at 40 or 45. Starting at 52 and trying to retire early can be a tight fit. In this case it’s tough because Liz is talking about 5, 8, or 13 years… and then maybe even 3 years. It really depends where people are already at in their financial journey.

    I’m also impressed by all the knowledge of Canadian retirement systems. When you said the health care in Canada thing, I wondered to myself if we (Americans) had to pay for a wall to stop us from going there for health care ;-).

    • I think 8 years is very doable for her. She has many advantages. The pension and retirement benefits will help a lot. Her cost of living is also not too bad. Maybe she can cut down a bit after retirement. That will help too.
      I had to do some research for this post. I didn’t know anything about the Canadian system previously. It sounds pretty good, especially the OAS and GIS. We don’t really have that here in the US.

  21. Clearly starting earlier on the savings habit makes things easier, but it is never too late to make progress. A couple of things that I think are important are:
    1. the definition of early retirement, which is something you touched on. In my view, any time ahead of the statutory retirement age is early, and kudos to anyone who achieves this.
    2. what is the reason for people to seek early retirement? Understanding the reasons can help people make decisions that still let them achieve their objectives even if they require some additional income at the same time. As you mentioned, part time work may be a good fit for some people, contract/seasonal working, say 6 months on 6 months off might suit some, or a number of other variations.

    • I didn’t write much about the reason. I’ll follow up with her to see what she thinks.
      Working part-time is a great option if you don’t want to work full-time anymore. I think everyone should consider it.

  22. Great Post Joe, many have circumstances outside of personal control that prevented saving earlier. Many also did not get woke until later in life with respect to the power of saving, investing, and compound interest. As your post explains, there are reasons to harness the positives today which are in a way opportunities for the later saver. One of the things I’ve been thinking about and writing about lately is how we all have slips on the road to FI and they can make us stronger. Your post highlights that even if starting from a later age there are advantages as well. Best of luck to all on the path

    • Exactly. Everyone has different advantages and disadvantages. We just have to work with what we have.
      It’s easier for older savers to save for retirement, but they probably can’t retire as early as someone who started young. As long as you retire before 65, that’s still pretty good. Right?

  23. Yeah, saving late is a tough one. You’re really dependent upon what kinds of returns the market provides in your short time horizon. It could be very difficult if there’s a lots decade or something where returns are minimal.

    This shouldn’t scare people off from having families and living of course — I still had two kids and managed to RE. I was just a very consistent saver.

    • We’ll have to see what happens in the next 5 years. The stock market probably won’t do as well as the last 5 years, but nobody knows. It’s tough to start late, but better late than never.

  24. Hey Joe, it’s pretty tough to make up ground for early retirement if you start as late as Liz. But, it’s certainly not impossible. If she took the time to learn about real estate investing and purchased some decent cash flowing properties, she could supplement her income required significantly. This could also be accomplished by creating some other form(s) of passive income that doesn’t require her direct labor.

    • She is in an okay position at 52 so I assume she started in her 40s. At least she has some retirement savings and the house is paid off. That’s better than a lot of people.
      I agree about real estate. That’s the way to go if you can handle it. Rental income is a proven way to make passive income.


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