If You've Banked $1 Million By 45, Is It Possible to Retire?

"It's safe to say that everyone hopes to have a nice savings and retirement account by the time they turn 45. The dream should always be to retire early enough to still enjoy one's golden years. If you can set aside $1 million by this age, it begs the question of whether you should and can retire early. If you are part of the FIRE movement, which focuses on financial independence and early retirement, any question about early retirement will focus on several factors."

"Traditionally, most people looking to retire early look at the 4% safe withdrawal rule as the baseline for whether or not it's affordable to quit. If you take $1 million at a 4% withdrawal yearly, you are talking about $40,000 per year, for roughly the next 30 years. This doesn't feel all that long considering life expectancy, but you also have to remember that you can withdraw Social Security starting at age 62,"

"First and foremost, if you want to retire on just $40,000 per year, you must consider finding a low-cost state and a low-cost-of-living area in that state. Typically, the Midwest and the Southeast, save for South Florida, have been good choices for this type of budget. It's not uncommon in certain places of Kansas, Iowa, and Illinois, outside of the big cities, where you can live with annual expenses of less than $40,000."

Saving $1 million by age 45 creates the possibility of early retirement but requires evaluating lifestyle, cost of living, and sustainable annual spending. The commonly used 4% safe withdrawal guideline on $1 million yields about $40,000 per year, which is expected to last roughly 30 years. Social Security benefits can begin as early as 62 and average around $1,900 per month at Full Retirement Age of 67. Retiring on $40,000 annually typically necessitates living in low-cost regions such as parts of the Midwest or Southeast. Investing the principal and earning more than 4% can help the nest egg grow even while withdrawing.

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