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FIRE basicsHow to retire early, step by step
Retiring early comes down to one number and one rate: the portfolio your spending needs and the share of income you save. On $60,000 after tax, saving 50% takes about 16.6 years from nothing at 5% after inflation; saving 25% takes 31.9.
1. Know what you spend
Track a full year. Your retirement number comes from spending, not income, and every $1,000 a year less lowers it by $25,000 at 4%.
2. Set your number
Spending divided by a withdrawal rate for a long retirement: $40,000 ÷ 3.3% = $1,212,121 for 40 years. The FIRE calculator does it with your figures.
3. Raise your savings rate
Years to financial independence from nothing, on $60,000 after tax, at 5% after inflation and a 4% withdrawal rate:
| Savings rate | Saved a year | Spending a year | Years to FI |
|---|---|---|---|
| 10% | $6,000 | $54,000 | 51.4 |
| 25% | $15,000 | $45,000 | 31.9 |
| 50% | $30,000 | $30,000 | 16.6 |
| 70% | $42,000 | $18,000 | 8.8 |
A higher rate works twice: more goes in and the target shrinks.
4. Plan the bridge to 59½
Money in IRAs and 401(k)s generally owes a 10% additional tax before 59½. Early retirees build a taxable account, use a Roth conversion ladder or 72(t) payments, or the rule of 55 from 55.
5. Cover health insurance until 65
Medicare starts at 65; until then COBRA, the Marketplace or a spouse's plan. See health insurance before Medicare.
6. Test the plan against a bad start
A fall in the first years does the most damage. The how long will my money last calculator runs your plan with two bad years first.
These figures are illustrations worked out from stated assumptions, not forecasts. Real returns vary from year to year, and taxes, fees and the order of good and bad years change the outcome. See the disclaimer.
Questions people ask
How to retire early with no money?
Starting from zero, the savings rate decides the timeline: at 50% of $60,000 it is about 16.6 years, at 70% about 8.8, under the assumptions above.
How to retire early without penalty?
Use money that has no age rule first, such as a taxable account or Roth IRA contributions, and the IRS exceptions to the 10% additional tax: the rule of 55 for your last employer's plan or 72(t) payments.
How to retire early with 401k?
Through the rule of 55 if you leave at 55 or later, 72(t) payments at any age after rolling it into an IRA, or a Roth conversion ladder. Withdrawals from a traditional 401(k) are taxed as income either way.
Check your numbers
The retire early calculator gives your age and bridge years.
Sources
- Amy C. Arnott, "How Much Can You Safely Withdraw If You Retire Early?", Morningstar, September 15, 2026 (data as of September 30, 2025).
- Internal Revenue Service, Topic no. 557, Additional tax on early distributions from traditional and Roth IRAs.
- Internal Revenue Service, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs.
- Medicare.gov, When does Medicare coverage start?
Keep reading
- What is FIRE? Financial independence in numbers
What financial independence means, the five versions and how much each one costs.
- The 4% rule explained
Where the 4% rule comes from, how long a portfolio lasts at each rate and what the rule leaves out.
- How to calculate your FIRE number
The formula, three worked examples, a table by spending level and how other income lowers it.
Last reviewed by Asier Fernández, editor, on . Educational information only, not financial advice. How we calculate