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How to retire at 45: 6 steps to a comfortable early retirement

High-impact tax strategies and effective financial planning can help you save the nearly $3 million dollar total you'll need to retire early. Learn how below.



April 19, 2024

8 min. read

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      If you’re like many people in their 20s or 30s, you’re probably wondering how to retire at 45 – and if it’s even possible. We’re here to show you that the right mindset, strategies, and tools can give you a strong chance at a comfortable and long retirement. 

      Below, we’ll cover everything from calculating how much money you’ll need to retire at 45 to reduce your tax liability.

      1. Figure out how much you’ll need to retire early

      If you’re a fan of planning ahead, you may ask yourself questions like, “How much do I need to retire at 45,” or“Can I retire at 45 with $3 million?” Well, let’s do the math:

      By 2040, buying power is expected to decrease by 53% based on inflation estimates, so consider your expected living expenses when setting your ideal retirement goal. According to the U.S. Bureau of Labor Statistics, a retiree household led by someone aged 65 or older currently spends $50,220 per year on average. Adjusted for the projected inflation we mentioned, that totals to about $94,755 per year.

      With the average American life expectancy at 76 years old, you’ll have about 31 years to fund. That means the total estimated cost of early retirement is $2,937,396.

      To find your yearly savings goal, divide that by the number of years between your age and 45. For example, a 30-year-old in 2024 would need to put away about $195,826 per year to comfortably retire at 45. We know that’s an intimidating goal, so we outlined some high-impact focus areas for retirement planning. Starting with your taxes.

      2. Plan your tax strategy for retirement bliss

      Now that you have a solid savings goal for retirement, it’s time to be strategic about your taxes. Tax planning plays a vital role in retiring early with little tax liability and can massively impact your retirement savings, income, and overall financial situation.

      Remember, it's all about taking control of your tax situation and making decisions that work in your favor. Here are some ways to reduce your tax burden during retirement:

      Cornstarch the star cuts piles of money in half with copy listing 4 ways you can reduce your taxes in early retirement.
      • Consider Roth conversions: Converting your traditional retirement accounts into Roth IRAs means you won't have to pay any taxes on your withdrawals during retirement. Though you’ll pay taxes during the conversion, keeping more money in your pocket and minimizing your tax burden during retirement is a smart strategy.
      • Take advantage of capital gains tax rates: If you have investments that have grown in value, consider holding onto them for at least a year to qualify for those sweet long-term capital gains tax rates. They’re often lower than regular income tax rates, so you’ll pay less in taxes when you eventually sell those investments to fund your retirement.
      • Plan for tax-efficient withdrawals: Strategically withdrawing from your retirement accounts based on their tax implications can reduce your overall tax burden.
      • Stay informed about tax laws and changes: Tax laws can change, and new opportunities for tax savings can arise. Staying on top of it all will allow you to make informed decisions about your retirement planning, take advantage of available deductions and credits, and minimize your tax liability.

      When it comes to minimizing your tax bill during early retirement, bringing in a tax expert can be your secret weapon. They know all the insider tricks to help you lower your tax liability and keep more money in your pocket to enjoy those retirement years.

      3. Find a financial advisor that gets you

      Looking for a financial advisor can feel overwhelming, but it’s necessary if you want an effective wealth-building strategy. Look for someone who understands your money goals and can provide personalized advice that suits your needs.

      One of the best ways to find this kind of advisor is by tapping into your network and asking friends or family for recommendations. You can also do some internet sleuthing and read reviews from other clients to see if a particular advisor is a good fit for you. A little research goes a long way!

      After you have a list of potential advisors, set up meetings to get the ball rolling. This step is important because you’ll see if they're a match for your financial situation and goals. Ask the potential advisors all the questions that pop into your head, and be crystal clear about what you expect.

      And when the advisors are pitching themselves, keep these factors in mind:

      • Do they have the proper credentials and a solid track record?
      • Does their fee structure work for you and your budget?
      • Do they have good communication skills, and how quickly do they respond to you?
      • Does their investment philosophy jive with your goals and how you handle risks?
      • And, of course, do you feel a personal connection and trust them with your financial future?

      Remember, a financial advisor is worth it, but only if you’re comfortable with them and they truly understand your needs. The right person will give you peace of mind knowing that you are on the right track to achieving the retirement of your dreams. Plus, you can always change your advisor if you aren’t hitting important goals and milestones.

      4. Take advantage of retirement plans 

      If you're looking to retire early, it's important to take advantage of workplace retirement plans to help you save for the future. Retirement plans offer a range of benefits, including lowering your taxable incomes and employer contributions, that can help you build a nest egg for retirement.

      Let’s explore some of the most popular retirement plans and how they can help you achieve your financial goals. With the right retirement plan, you can be on your way to retiring at 45.


      A 401(k) is a cool way to save for retirement while lowering your tax bill. Basically, you can put aside part of your income before taxes, so you pay less in taxes overall. 

      One of the best things about a 401(k) is that many employers will also match your contributions, so for every dollar you put in, they'll put in some money, too. Some employers will match a whopping 50% of your contributions up to a predetermined limit.  

      Another highlight is that if you leave the company and start working somewhere else, you can find your old 401(k) and continue where you left off. Just remember that it won’t automatically transfer, so you’ll have to either keep managing it or roll it over into a new 401(k) or an IRA. 

      With a 401(k), you can decide how to invest your money. There are several options to choose from, which can help you build a balanced portfolio that fits your needs and goals. 

      These accounts are great retirement assets, but you can't withdraw from them without paying penalties until age 59.5. So plan ahead for the funding gap until you reach retirement at 60.

      Individual Retirement Accounts (IRA)

      An Individual Retirement Account is a great way to save for your future retirement. 

      One of the best things is that you have a lot of flexibility when choosing your investments. You can invest in various assets, like stocks, bonds, and mutual funds, for a diversified portfolio that aligns with your goals and risk tolerance. 

      Generally, you can choose from two main IRA types: traditional and Roth. 

      A traditional IRA allows you to take a tax deduction for your contributions in the current year.Essentially, it's a tax-deferred investment account, so you won't have to pay taxes on that money until you withdraw it. This is a great strategy for retirement planning because it helps reduce your tax bill in the short term, freeing up more money to save and invest. Plus, tax-free growth means larger potential gains over time.

      On the other hand, a Roth IRA gives you a tax break in retirement by allowing after-tax contributions, which you can invest and grow tax-free. This account is ideal if you expect a higher income bracket when you retire.

      Employee pension plans

      An employee pension plan is a retirement plan that’s available to most government employees. Basically, it's a defined benefit plan that provides a guaranteed income stream in retirement. 

      With a pension plan, your employer contributes to the plan on your behalf, and the amount you receive in retirement is based on a formula that factors in your years of service and salary history. This means that the longer you work for your employer and the higher your salary, the more you can expect to receive in retirement.

      Another benefit is that your employer is responsible for managing the investments and assuming the risk, so you don't have to worry about shifting your portfolio due to market fluctuations. 

      5. Come up with a plan and stick to it

      Having a retirement savings plan is like having a roadmap to guide you towards early retirement and a secure future. It can help you make smarter choices about saving, investing, budgeting, and managing your debts.

      Figure out how much money you'll need, when you want to retire, and how you'll get there. A solid financial plan should include:

      • Clear and actionable goals
      • A balance sheet that lists your assets and liabilities, and your net worth
      • A budget that helps track income and expenses
      • Strategies for saving and investing
      • A plan for managing debt
      • Steps to protect your financial well-being through insurance and emergency funds

      After establishing your early retirement financial plan, you’ll want to make sure you can stick to it. 

      Illustration of a gameplan on a white board with a list of things to include in your retirement plan, plus tips to stick to it.

      Sticking to your plan

      Leveling up your savings plans and contributions is a great way to support your early retirement financial goals and stay on track with your plan. The goal here is to really ramp up your efforts to build a solid financial foundation. Take a look at your current savings plan – are you using a high-yield savings account? Can you afford to increase your monthly deposits? It may require some adjustments, but trust me, it'll be worth it when you’re retired and living lavishly.

      Next, look at your retirement accounts, like your 401(k) or IRA, and see if you can bump up your regular contributions. Sure, small contributions over time will add up, but try to max them out if you can. Consider opening a mega backdoor Roth account to boost your retirement savings to $43,500. For reference, the standard Roth 401(k) contribution limit for 2024 is only $23,000. 

      You can also automate your contributions so your accounts continuously grow throughout the years. Set up automatic transfers from your paycheck directly into a separate retirement savings account so you don’t have to think about it. 

      To retire as young as 45, quickly eliminating debt is a must. An efficient and popular strategy is the snowball method. Essentially, you order your debts from smallest to largest, tackling the lowest amount first and building momentum until you’ve paid everything off. 

      Of course, saving enough to retire early might be difficult if you’re relying on a single paycheck.Consider part-time work, freelance gigs, or even starting a small business to generate additional income. These opportunities can boost your retirement savings and provide extra financial security.

      6. Start investing ASAP

      If you want to retire at 45, start investing as soon as you have the disposable income to do so. Time is money with most investments.

      If you’re just starting and aren’t loaded with cash, consider using robo-advisors to invest in ETFs. This approach is more affordable and accessible than traditional investing, and it’s a great way to avoid wasting your precious pre-retirement time. 

      ETFs are like a bucket of investments you can buy or sell on the stock market, just like a regular stock. They aim to match the performance of a particular sector or index, providing you with a diverse and flexible investing option. And the real beauty is that you can choose ones that focus on tax-free investments for a diversified, retirement-friendly portfolio. 

      Robo-advisors are automated digital platforms that offer investment advice and manage portfolios for individuals based on their financial goals and risk tolerance. Their use of technology and automation allows for relatively low account fees and deposits. Most of them choose ETFs or mutual funds based on your age and offer automatic rebalancing, to help keep your portfolio in line with your goals.

      However, higher-income investors might consider a more aggressive investing strategy. Traditionally, lucrative investments include options, stocks from emerging markets, and start-up company stocks. While aggressive investing can offer higher rewards, it also comes with higher risks, like the potential for huge losses and unpredictable markets. If your hard goal is to retire at 45, keep a well-diversified portfolio with no more than 10% in high-risk assets.

      If you're new to investing, now’s a great time to look for a trustworthy stock brokerage to manage your portfolio to help keep you on track with your early retirement plans. 

      Remember that investments that offer higher rewards often come with higher risks. If you have the option, it's a good idea to work with a financial advisor who can help build out a strategy that prioritizes your goals and risk tolerance.

      Certificates of Deposit (CDs) FDIC-insured, time-bound deposits that banks and credit unions offer at a fixed interest rate for a set term
      Treasury Bonds Government-issued debt securities with fixed interest rates and different maturity periods
      Money Market Funds Investments that put your money in low-risk securities to maintain a steady value per share
      Fixed Annuities Contracts with insurance companies where they return your contributions with a fixed interest rate over a set term
      • Certificates of deposit (CDs): These are time deposits banks and credit unions offer. They come with a fixed interest rate and a specific term, and the FDIC in the U.S. insures them, which means they're one of the safest ways to store your cash.
      • Treasury bonds: These are debt securities issued by the government. Because the government's creditworthiness backs them, they're considered one of the safest investments. Treasury bonds offer a fixed interest rate and different maturity periods, so you can choose what works best for you.
      • Money market funds: Money market funds are investments that put your money in low-risk securities such as Treasury bills and commercial paper. The main aim of these funds is to maintain a steady value per share while providing easy access to your money. If you're searching for a safe investment option, money market funds might be the right choice.
      • Fixed annuities: Fixed annuities are contracts insurance companies offer, where you get a fixed rate on your investment for a set period. Fixed annuities provide a consistent income stream and are considered low risk, especially when you choose trusted insurance companies.

      While these investments are generally safe, they might not offer as much potential for high returns as riskier investments. Before deciding where to put your money, it's a good idea to consider your financial goals and how much risk you're willing and able to take.

      The Playbook Take

      Whether you're just starting or already well on your way, there are always steps you can take to improve your financial well-being and pave the way for a bright future. If you’re curious about how to retire early at 45, you’re not alone. The key is to build a solid financial plan, stick to it, and take action to make sure you're on track. 

      Playbook revolutionizes financial planning by prioritizing tax efficiency and implementing an automated investment approach. Start your journey to early retirement today by building your Playbook plan.

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      About the author

      Phil Wettersten, Series 7 & 66

      Head of Product Success

      Phil holds both Series 66 and Series 7 credentials and previously served as an Investment Consultant at TD Ameritrade. At Playbook, he's the authoritative voice representing our customers, spearheading product enhancements and strategic planning. Phil's unwavering dedication keeps us ahead in delivering top-notch user experiences.

      Tanza Loudenback, CFP®


      Tanza is a CFP® certificant, writer, and editor. From 2015 to 2021, she was a top-read author and editor at Insider. Her work focuses on helping people make smart decisions with their money and is published by a variety of online publications.

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