I’m 55 and planning on resigning from my job on Monday – do I have enough saved or is this foolish?

When I see people talk about early retirement, I sometimes get a little worried for them. Stretching a nest egg — even a large one — gets more and more challenging when you leave the workforce well ahead of what’s considered a typical retirement age.

This Reddit poster is in a very different boat, though. They’re planning to resign from their job and retire at 55, which is young, but not so incredibly young. They’ve also managed to save quite a lot of money.

But my advice to this poster is the same advice I’d give anyone contemplating early retirement: Think about what you want your senior years to look like. And then, run the numbers carefully to make sure you’re not making a big mistake.

It’s a matter of what you want out of retirement

The poster above has a lot going for them. They’re expecting the maximum Social Security benefit, they have $5 million between their brokerage account and 401(k), and they own a $1.5 million home that’s paid off. They’re also expecting a pension of $185,000 a year.

Their current annual spending amounts to $300,000 a year. However, they say they’re hoping to reduce their spending to $250,000 a year once they retire.

Now someone at age 55 is a good 12 years away from qualifying for their complete Social Security benefit at full retirement age. But that $250,000 a year is still attainable for this poster largely because of their generous pension.

Believe it or not, a $5 million nest egg isn’t necessarily large enough to support $250,000 in annual income, as that would mean withdrawing at a rate of 5%. That’s above the commonly recommended 4% rule.

And the 4% rule isn’t even necessarily appropriate for someone retiring at 55, since it’s designed to help savings last for 30 years. Retiring at 55 could mean needing a lot more mileage out of your nest egg than 30 years.

However, this poster doesn’t need to solely rely on their savings. So if they’re able to cut their annual spending down to $250,000, their plan looks pretty solid.

Don’t rush into early retirement

Even if you’ve saved a lot for retirement, leaving the workforce early carries some risk. So it’s important to ask yourself the right questions before diving in.

The first question: How much annual income will I get from my savings, and will it be enough to cover my desired lifestyle? You may not have quite the same expenses as a retiree as you did when you were working. But some of your expenses, like healthcare and entertainment, could increase, so you’ll need to make sure the numbers work.

The second question: Can I get access to my retirement savings right away, or do I need to wait? It’s common to have the bulk of your savings in a tax-advantaged plan like an IRA or 401(k). But these accounts typically impose a 10% penalty for removing funds before age 59 1/2. If early retirement is on your radar, you may want to specifically invest some of your money outside of an IRA or 401(k).

That said, under some circumstances, you can access your 401(k) penalty-free starting at 55. That may be why the poster above is aiming to retire at 55.

All told, this poster’s plan doesn’t scream like a big risk. But early retirement is something to think through carefully — and not necessarily on your own. So if you’re interested in it, I suggest working with a financial advisor to make sure your plan works. And if the numbers don’t quite align, an advisor can show you what tweaks are needed to ultimately retire securely.

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