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one of our viewers asked this question i'm age 48 i want to retire early at age 55 how much money do i need to save for retirement i have 150 000 saved and a good job so stay tuned for the full episode thank you for watching this is richard with wisdom investor one of our viewers wants to retire early at age 55 and go to europe and travel for four or five years there so let's take a look at the full question i'm 48 single my income is 100k i have about 100k in cash savings about 50k in various 401ks my condo is paid for my car is paid for and i have zero credit card debt my expenses are 1700 per month i'm 48 and would like to stop working at 55 how much would i need to save invest over the next seven years to be able to reduce my income to 20k per year and enjoy my pre-retirement years i would hope to spend ages 55 to 67 living in europe so our viewer wants to know how much they need to save and invest over the next seven years okay let's take a look at facts about income age 48 wants to retire at 55 or 57 has a hundred thousand in savings and 50k 401k makes 100k from a job okay let's take a look at expenses here monthly expenses are 1700 per month no debt owns a house and is building equity main concern here is how much to say to have enough to live on twenty thousand dollars per year while he goes to europe so let's build a picture here of his entire situation job he's earning 100k per year i'm estimating his taxes in fica at 18 that's about 18 000 per year he said his living expenses were 1700 per month i'm going to round that out to 21 000 per year so here's what we have salary 100k 21 000 living expenses 18k in taxes i'm going to take out 10 000 per year for unexpected expenses emergency and i'm estimating 26 000 for 401k contribution per year we'll go over the details that in just a moment that leaves a total of 25 000 after tax balance that he can use to invest now when we do this scenario here i'm actually going to reduce that down to about 15 000 just to allow for some contingencies that may come up so that we can be ultra conservative on this situation okay so let's set up a plan here remember our goal is we want to know how much he needs to save and invest so he can travel to europe and spend twenty thousand dollars per year first goal is to make sure he has some type of an emergency fund at least twenty five thousand dollars minimum that's six months living expense so we've got three steps here to calculate savings to get the amount that he can save number one is we're going to determine amount of savings from his 401k the second we're going to determine the amount that he can save from his 100 000 salary and number three determine the amount he can save from his existing one hundred thousand dollars let's take a look at step one here what can he do with his 401k employees can contribute up to 19 500 to their 401k plan in 2021 and then there's an additional catch-up contribution he can do of 6500 in 2021 and also he'll want to be aware of rule of 55 for his 401k withdrawal so for the 401k he has a 100 000 salary he can maximize his 401k withdrawal to the 19 500 and he can also do the 6500 catch up at age 50. so for this first calculation we're going to use this calculator from bankrate.com it's the retirement calculator you can do a search on google for bankrate.com retirement calculators here's the information we're going to plug in percent to contribute 19.5 percent annual salary 100k annual salary increase 2 percent current age 48 age of retirement 55 current 401 k savings 50 000 and the annual rate of return from investments is going to be seven percent this is going to be 288 615 once we do the calculation so for step one our first calculation is 288 615 for the 401k savings our step 2 calculation is for the ketchup 6 500 can be saved per year starting at age 50 for five years we're going to estimate a seven percent return that comes to eight thousand three hundred and twelve that's from age fifty to age fifty five we use the simple savings calculator from bank rate again you can go to bankrate.com again you can do a search bankrate.com savings calculator now let's take a look at his savings that he had saved up we're gonna invest that for seven years we're gonna estimate a seven percent return keep in mind past performance of the stock market is no guarantee of the future performance we're going to use a value of fifteen thousand dollars that he can save that's after tax that's gonna come to two hundred ninety four thousand five hundred two dollars let's go back and review where the fifteen thousand came from after we took his income minus expenses that came to twenty five thousand i reduced his amount that he could save after tax to fifteen thousand just in case there's something unexpected in here let's now look at totals from all three steps we talked about the 401k savings that came to 288 615 the catch-up provision after investments it would grow to 38 257 and then his existing savings if we save that earned seven percent added fifteen thousand dollars per year comes to two ninety four five oh two so here's all of our calculations the total comes to six hundred twenty one thousand three hundred and seventy okay let's take a look and see if he's going to be able to retire early and travel he needs twenty thousand dollars per year we calculated his savings to be six hundred and twenty thousand we're going to reduce that round it down to six hundred thousand to be conservative let's say his growth is only five percent again we're gonna be ultra conservative here his return per year at five percent is going to be thirty thousand dollars per year so he could spend his thirty thousand dollars per year and not touch the six hundred thousand dollar principle that he has based on our calculations here and all the information it was given it looks like our viewer would be able to retire early at age 55 and go to europe and enjoy his retirement if you have any other suggestions on this particular situation leave your comments thanks for watching stay tuned to future updates