Jul 11, 2026
Megan, a 48-year-old single mother, is hoping to retire at 55 — driven, in part, by her father’s death.
“My dad passed away at 66, just two months shy of retirement, and I’ve made it my goal to call it a day at 55,” she told Suze Orman on her show How Am I Doing?
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In terms of retirement readiness, Megan gives herself a grade of B-minus. While she thinks she could be saving a bit more, she also thinks she’s “so close that the return on the money wouldn’t be that much.”
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But walking through the numbers, Orman comes up with a different conclusion. And a different grade: a D-minus. Still, Orman says there’s a way Megan can earn an A — and it doesn’t require much effort on her part.
Planning when to retire is a conundrum for many Americans. The traditional retirement age is widely considered to be 65 (and the government defines it as 66 or 67, depending on your year of birth), but it’s an arbitrary number.
Not everyone wants to retire at 65 — and many end up retiring much earlier (sometimes by choice, sometimes not).
The average American retires around age 62, according to a survey from the Transamerica Center for Retirement Studies. Only 14% of retirees say they actually retired at 65, while one in three (31%) retired past the age of 65 — including 8% who don’t intend to stop working.
But to earn an A on retirement readiness, it’s worth considering Orman’s advice to Megan.
Breaking down the numbers
Determining when to retire can be a tough decision. After all, you don’t want to prematurely drain your retirement savings. But some people, like Megan, might be underestimating their future returns.
The earlier you start saving, and the longer you save, the more you’re able to benefit from compound interest. This means you’re earning returns on both your principal and the interest you’ve accumulated over the years, which has a snowball effect on your savings.
Retiring early means you could miss out on your peak earning years, as well as the ability to make catch-up contributions to your retirement accounts, which could boost your savings even further.
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If you’re 50+, you can make a catch-up contribution of $8,000 to your 401(k) or 403(b) in 2026. And if you’re aged 60 to 63, you can contribute an extra $11,250. You can also contribute an extra $1,100 to your IRA (traditional or Roth) on top of the $7,500 annual limit.
If you retire early, you’ll also have to pay for private health insurance before Medicare kicks in at age 65. With an average U.S. lifespan of 79 years (76.5 years for men and 81.4 years for women), early retirement means you might need to stretch your savings over 30 years or more.
So far, Megan has $864,000 in retirement savings, $344,000 in investments and $23,000 in an emergency fund. Her home is worth $285,000 and she has $92,000 left to pay on her mortgage. She’s almost paid off her car, with about $1,500 left on her car loan.
That gives her a net worth of about $1.4 million. But, after crunching the numbers, Orman would give Megan a D-minus on retirement readiness — that is, if Megan wants to retire at 55.
“Your dad died 11 years older than 55. He died at 66. So you really want to enjoy your life,” Orman told Megan. “But what if you’re wrong?” If Megan lives into her 80s or 90s, she’ll need her money to last.
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To get an A, Orman recommends that Megan keep working until age 62. “Not a big difference in terms of years, but a big difference in terms of money.”
If Megan retired at age 55, she’d have about $1.6 million from her 401(k) and investments. Orman tells her if she works until age 62, that would jump to almost $2.5 million — giving her an extra million bucks. To break it down into monthly retirement income, that means $4,200 a month of after-tax income versus $2,500 a month. And that’s before Social Security is added into the mix.
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Deciding when to retire
If you’re trying to figure out how much you’ll need to retire, a common rule of thumb is to save 10 times your pre-retirement income by age 67 — though this depends on your annual income, current savings and desired retirement lifestyle.
If you tap into traditional retirement accounts such as 401(k)s and IRAs before age 59½, you’ll face a 10% early-withdrawal penalty. And that’s on top of taxes.
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However, the IRS’s “rule of 55” means you could tap into your current 401(k) or 403(b) without penalty — but only if you’ve been laid off, fired or quit the year you turn 55. This only applies to your current plan, not plans from previous employers.
The earliest you can claim your Social Security retirement benefit is age 62, though you’ll receive a permanently reduced benefit, by up to 30%. If you wait until your full retirement age, you’ll receive 100% of your benefit, and if you wait even longer — up until age 70 — you’ll get an annual bump of 8%.
If you retire early, then you’ll most likely need to fill in the gap with other savings and investments. But selling investments could also trigger capital gains taxes.
It’s worth sitting down with a financial advisor to crunch the numbers to determine if, indeed, you really can afford to retire early. It might mean working a few more years, but it could make a significant difference in your retirement income — in Megan’s case, a million-dollar difference.
Orman tells Megan that by adjusting her retirement date “you’re going to hope and wish that you live a long, long life.”
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Vawn Himmelsbach is a veteran journalist who covers tech, business, finance and travel. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, CBC News, Yahoo Finance, MSN, CAA Magazine, Travelweek, Explore Magazine and Consumer Reports.
