Editing Retirement (section)

==Early retirement==
{{see also|FIRE movement}}
Retirement is generally considered to be "early" if it occurs before the age (or tenure) needed for eligibility for support and funds from government or employer-provided sources. Early retirees typically rely on their own [[saving]]s and investments to be self-supporting, either indefinitely or until they begin receiving external support. Early retirement can also be used as a euphemistic term for being terminated from employment before typical retirement age.<ref name="bogleheads_guide">{{cite book|last1=Larimore|first1=Taylor|title=The Bogleheads' Guide to Retirement Planning|publisher=Wiley|page=213}}</ref>

===Savings needed===
{{further|Withdrawal rate}}
{{multiple image | total_width=450
| image1= Year-to-year portfolio balances example 73-75.gif |caption1=Portfolio balances after taking $35,000 (and [[Inflation adjustment|adjusting for inflation]]) from a $750,000 portfolio every year for 30 years, starting in 1973 (red line), 1974 (blue line), or 1975 (green line).<ref>{{cite web|url=http://firecalc.com/intro.php|title=FIRECalc: Why another retirement calculator?|work=firecalc.com|access-date=16 January 2017}}</ref> Results depend heavily on what happens to the [[stock market]] in the first few years.
| image2=20200101 Remaining life expectancy - US.svg |caption2=''Remaining'' life expectancy—expected number of remaining years of life as a function of ''current age''—is used in [[Pension|retirement income]] planning.<ref name=SocSecPeriodLifeExpectancy_2020>{{cite web |title=Actuarial Life Table |url=https://www.ssa.gov/oact/STATS/table4c6.html |publisher=U.S. Social Security Administration Office of Chief Actuary |archive-url=https://web.archive.org/web/20230708231105/https://www.ssa.gov/oact/STATS/table4c6.html |archive-date=July 8, 2023 |date=2020 |url-status=live }}</ref> Many will exceed their life expectancy, requiring income over a longer period.
}}
While [[conventional wisdom]] has it{{who|date=February 2018}} that one can retire and take 7% or more out of a portfolio year after year, this strategy would not have worked very often in the past.<ref>{{cite news| url=https://www.wsj.com/articles/SB114816694417158844 | work=The Wall Street Journal | title=Make Sure Your Money Lasts as Long as You | first=Jonathan | last=Clements | date=21 May 2006}}</ref><ref>{{cite web|url=http://www.dallasnews.com/s/dws/bus/scottburns/columns/archives/1995/951003TU.htm|title=Dallas News: Breaking News for DFW, Texas, World|work=dallasnews.com|access-date=16 January 2017}}</ref>

Those contemplating early retirement will want to know if they have enough to survive possible [[bear market]]s. The history of the US [[stock market]] shows that one would need to live on about 4% of the initial portfolio per year to ensure that the portfolio is not depleted before the end of the retirement;<ref>{{cite web|url=http://www.dallasnews.com/s/dws/bus/scottburns/readers/trinitystudy/table3.html|title=Dallas News: Breaking News for DFW, Texas, World|work=dallasnews.com|access-date=16 January 2017}}</ref> this rule of thumb is a summary of one conclusion of the [[Trinity study]], though the report is more nuanced and the conclusions and very approach have been heavily criticized (see [[Trinity study]] for details). This allows for increasing the withdrawals with inflation to maintain a consistent spending ability throughout the retirement, and to continue making withdrawals even in dramatic and prolonged [[bear market]]s.<ref>{{cite web|url=http://retireearlyhomepage.com/safesum.html|title=Retire Early's Safe Withdrawal Rates in Retirement.|work=retireearlyhomepage.com|access-date=16 January 2017}}</ref> (The 4% figure does not assume any pension or change in spending levels throughout the retirement.)

When retiring prior to age {{frac|59|1|2}}, there is a 10% IRS penalty on withdrawals from a retirement plan such as a 401(k) plan or a Traditional IRA. Exceptions apply under certain circumstances. At age 59 and six months, the penalty-free status is achieved and the 10% IRS penalty no longer applies.

To avoid the 10% penalty prior to age {{frac|59|1|2}}, a person should consult a lawyer about the use of IRS rule 72 T. This rule must be applied for with the IRS. It allows the distribution of an IRA account prior to age {{frac|59|1|2}} in equal amounts of a period of either 5 years or until the age of {{frac|59|1|2}}, whichever is the longest time period, without a 10% penalty. Taxes still must be paid on the distributions.

===Calculations using actual numbers===
Although the 4% initial portfolio [[withdrawal rate]] described above can be used as a rough gauge, it is often desirable to use a retirement planning tool that accepts detailed input and can render a result that has more precision. Some of these tools model only the retirement phase of the plan while others can model both the savings or accumulation phase as well as the retirement phase of the plan. For example, an analysis by ''[[Forbes]]'' reckoned that in 90% of historical markets, a 4% rate would have lasted for at least 30 years, while in 50% of the historical markets, a 4% rate would have been sustained for more than 40 years.<ref>{{cite web|url=https://www.forbes.com/sites/fidelity/2015/03/04/five-ways-to-protect-your-retirement-income/|archive-url=https://web.archive.org/web/20150306230311/http://www.forbes.com/sites/fidelity/2015/03/04/five-ways-to-protect-your-retirement-income/|url-status=dead|archive-date=6 March 2015|title=Five Ways To Protect Your Retirement Income|website=[[Forbes]]|date=4 March 2015|access-date=9 March 2015}}</ref>

The effects of making inflation-adjusted withdrawals from a given starting portfolio can be modeled with a downloadable spreadsheet<ref>http://retireearlyhomepage.com/re60.html downloadable spreadsheet</ref> that uses historical stock market data to estimate likely portfolio returns. Another approach is to employ a retirement calculator<ref>[http://firecalc.com FIRECalc: A different kind of retirement calculator<!-- Bot generated title -->].</ref> that also uses historical stock market modeling, but adds provisions for incorporating pensions, other retirement income, and changes in spending that may occur during the course of the retirement.<ref>{{cite web|url=https://www.nesteggly.com/retirement-calculator|title=The Ultimate Retirement Calculator}} retirement calculator that incorporates inflation, pensions and social security</ref>