Early retirement planning requires more than applying a savings multiple to a client’s current portfolio. Leaving work at 55 instead of 65 can add another decade of portfolio withdrawals, years without Medicare, and a longer period of exposure to market volatility. For RIAs, the analysis needs to connect spending, taxes, investment returns, and the client’s ability to adjust spending when conditions change.
How Much Does a Client Need to Retire Early?
The traditional 4% rule translates into roughly 25 times annual spending. A 3.5% withdrawal rate requires about 29 times annual spending, while a 3% withdrawal rate requires approximately 33 times.
For a client expecting to spend $100,000 annually, a 4% withdrawal rate implies a $2.5 million portfolio. At 3.5%, the required portfolio rises to about $2.86 million, while a 3% rate requires approximately $3.33 million.
These figures are starting points rather than complete retirement targets. Taxes, health insurance, long-term care, and irregular expenses can materially increase the required portfolio.
What Happens to Healthcare Costs Before Medicare?
Medicare eligibility generally begins at 65, leaving early retirees responsible for their own coverage before then. Someone retiring at 55 therefore needs to plan for roughly a decade of health insurance costs.
Potential sources of coverage include an Affordable Care Act marketplace plan, a spouse’s employer coverage, or COBRA after leaving an employer. The cost is not limited to premiums. Deductibles, out-of-pocket expenses, and the client’s income can all affect the final amount.
Income planning becomes particularly important for marketplace coverage. Withdrawals from traditional retirement accounts and Roth conversions can increase modified adjusted gross income and potentially affect eligibility for premium tax credits.
When Should Clients Use Social Security?
Social Security can generally begin at 62, while delaying benefits increases the monthly benefit until age 70. For people born in 1960 or later, full retirement age is 67.
After full retirement age, delayed retirement credits generally increase benefits by 8% for each year of delay, up to age 70. This makes Social Security timing particularly relevant for early retirees who need to decide whether to draw more heavily from their portfolio in their 60s in exchange for higher guaranteed income later.
How Should RIAs Handle Taxes in Early Retirement?
Early retirement can create a tax-planning window between the end of employment and the start of required minimum distributions.
Clients may have taxable brokerage accounts, traditional IRAs or 401(k)s, and Roth accounts. The order and amount of withdrawals can affect taxable income for decades.
Roth conversions can be particularly relevant during years when employment income falls. Advisors can model conversions against tax brackets while also considering their effect on marketplace health-insurance subsidies and future Medicare-related income thresholds.
What Other Areas Can Help RIAs Deliver More Client Value?
A strong retirement plan should not stop at investment performance. RIAs can create additional value by identifying opportunities across the client’s financial life and making sure nothing with a meaningful financial impact is overlooked.
Securities class action recovery is one such opportunity. Settlements totaled approximately $8 billion in 2025, creating potential recoveries for eligible investors. Platforms such as 11th.com automate settlement monitoring, holdings matching, claim filing, and payout delivery.
For RIAs, this can be another way to improve the overall value delivered to clients by capturing financial benefits that may otherwise go unnoticed.
What Will Early Retirement Planning Look Like in 2026 and Beyond?
Early retirement planning is becoming more detailed as clients face longer retirement periods, rising healthcare costs, and greater uncertainty around markets and taxes. Instead of relying on a single savings target, RIAs can use different retirement dates, spending levels, market conditions, and income strategies to show clients how their plans may perform under different circumstances.
FAQ
How much does a client need to retire early?
A rough starting point is 25 to 33 times annual spending, based on withdrawal rates of about 4% to 3%. Longer retirements, healthcare costs, and taxes can increase the required portfolio.
Is the 4% rule appropriate for early retirement?
It was designed for roughly 30 years. Clients retiring in their 50s may need a lower withdrawal rate or more flexible spending because their portfolios may need to last 40 years or longer.
How should clients cover healthcare before Medicare?
Options include marketplace coverage, a spouse’s plan, or COBRA. Advisors should also consider premiums, out-of-pocket costs, and the impact of income on subsidies.
Why is sequence-of-returns risk important?
Large losses early in retirement can reduce the portfolio while withdrawals continue. Modeling different return sequences shows how resilient the plan is to an early downturn.
When should clients claim Social Security?
Benefits can generally start at 62, while delaying after full retirement age increases benefits by 8% per year until 70. The decision should be coordinated with taxes and portfolio withdrawals.
What other areas can RIAs use to deliver client value?
Securities class action recovery is one example. With approximately $8 billion in 2025 settlements, automated monitoring and claim filing can help identify potential recoveries.
