How to Retire Early: A Guide for High Earners

What if you didn’t have to wait until 65 to step away from work? For high earners juggling a successful career with a desire for more personal freedom, the idea of early retirement isn’t just a pipe dream—it’s a strategic choice. Whether that means slowing down or pivoting to something new is entirely up to you. The key is aligning your finances with your goals. These four steps can help you evaluate your current strategy and chart a course toward a more flexible future.  

Maximize Savings for a Shorter Retirement Timeline

When planning to retire at a traditional age (say, 65 or older), you have two key advantages on your side: time and compounding returns. Together, they can do the majority of the heavy lifting when it comes to building substantial retirement income.

If you’re aiming to retire in your mid-50s, however, you’ll need to save a greater share of your income to make up for a shorter timeline. Put simply, the more time you have to save, the less you need to set aside each month. The less time you have, the more you need to save.

Consider how much you and your spouse earn and what level of spending still supports your quality of life. For example, if you and your spouse earn a combined $800,000 annually, could you live on 75% and allocate the remaining $200,000 to savings? Making some thoughtful trade-offs now could give you greater flexibility and confidence down the road.

How Private Investing Can Support Early Retirement Goals

If your goal is to step away from full-time work in your 50s, your 40s should be focused on building wealth, and that often means investing for growth.

We frequently help our clients explore more growth-oriented opportunities in the private market space. Depending on the specific investment type, we find that the private markets can be a helpful way to diversify and potentially reduce exposure to public market volatility.

One approach for building accessible wealth in early retirement is to ladder your private investments. Doing so would (ideally) help stagger their maturity dates, similar to following a bond ladder strategy. The goal here is to have private investments payout in different tax years during the early part of retirement, before traditional accounts like your 401(k) or IRA become available without penalty.

That said, private investments can be illiquid and unpredictable. Distributions often depend on factors outside your control. Your return on investment could largely depend on the sponsor’s exit strategy, buyer demand, or broader economic conditions. Because timing your exit from a private market investment isn’t an exact science, your strategy will need to be flexible enough to benefit from potential payouts, without feeling too reliant on the timeline.

Make the Most of Your Brokerage Account

While traditional retirement accounts are excellent wealth-building tools, they come with two important limitations for early retirees: you can’t access them without penalty until age 59½, and there are annual contribution caps.

Taxable brokerage accounts don’t offer the same tax advantages as retirement accounts, but they do give you the flexibility to contribute as much as you like and withdraw funds when needed. Plus, they may qualify for favorable long-term capital gains tax treatment (which maxes out at 20%).

The bottom line: tax-deferred growth is great, but it’s what you have in your pocket when you need it that matters, especially when it comes to supporting your early retirement goals. A well-managed brokerage account can help bridge the income gap between your last paycheck and your first penalty-free retirement distribution.

All that being said, tax efficiency should still be top of mind when establishing your long-term retirement income plan. The challenge? Balancing your current tax liability with your future tax bills to minimize tax drag. You may find it beneficial, for example, to place tax-inefficient investments (such as those that generate ordinary income) inside your tax-advantaged accounts, while reserving your brokerage account for assets that qualify for the more tax-effective long-term capital gains treatment. Strategies like tax-loss harvesting can also help you manage your annual tax bill and improve after-tax returns over time.

Planning Checkpoint: Adjustments to Keep You on Track

When you’re coming down the wire and just two to three years out from retirement, this is the time to review your full financial picture closely. Have you saved enough to support your timeline and lifestyle? Is there a shortfall between what you’ll need and what you have? And if so, what’s your plan to close the gap?

You may need to find opportunities to increase your retirement resources, whether that’s by:

• Reducing expenses and increasing your savings rate,
• Adjusting your retirement date,
• Shifting your investment strategy, or
• Continuing to work during retirement.

This can also be an ideal time to reflect on what you want your next chapter to look like. Are you truly ready for a full stop, or do you see yourself easing into retirement by pursuing part-time work, consulting, or starting a new business?

For many high earners, early retirement doesn’t mean walking away from work altogether—it means reclaiming control over how, when, and why you work. Starting a business or working as an independent contractor can offer not only income but also potential tax benefits that continue into retirement.

Turn Your Vision for Early Retirement into a Strategy

An earlier retirement is possible, with the right planning and intentional decisions along the way. Whether you’re looking forward to beach days or excited to start something new, we’re here to help you feel confident about the road ahead.

This article was originally published here and is republished on Wealthtender with permission.

About the Author