What do I need to know if I want to retire at age 55?

It seems you are not the only person thinking about this. I read a statistic the other day that stated the medium retirement age is now 62 -- and falling. Many people now say retiring at 55 is their goal. At the same time, people are living longer. If you make it to 65, the actuarial tables say you have at least 15 years in front of you.

Let’s see, retire at 55. Live to 80. As Frank Sinatra used to sing, “Something’s gotta give, something’s gotta give, something’s gotta give.” Retiring in your mid-50s is great -- if you can afford to. But it’s more difficult than it sounds. If you retire early, you make funding your retirement three times as hard.

• First, you reduce the amount of money you can save, since you will be leaving the workforce early.
• Second, retiring early means your retirement money has to last longer. Someone with a life expectancy of 81, who retires at 65, needs her money to last 16 years. That same person who retires at 55 needs it to last 26 years, and, by retiring early she has denied herself a chance to earn retirement money between the ages 55 and 65.
• Third, you reduce the amount of Social Security you’ll receive. Even if you retire early, you cannot apply for Social Security benefits until age 62. Since those benefits are based on your 40 quarters of highest earnings, you may be reducing the amount of benefits you receive by leaving the workforce early.

And by taking those benefits early, you certainly are. Someone born after 1960, for example, who takes Social Security at age 62, will receive just 70% of what they would have received if they wait until “full retirement age,” which for them is 67.

Ol’ Blue Eyes was right: If you are thinking of retiring early “something’s gotta give.” Either you have to make an awful lot of money when you are young, or downsize your lifestyle once you stop working.