I’m a 39-year-old single dad with $600,000 saved — I want to retire at 50 but don’t know how. What should I do?

I do not have a current retirement plan with my job as they do not offer one. My ultimate dream is to be able to retire by age 50, but I most likely will not be happy sitting at home and will want to work. I am looking for the best option for me to save more for retirement and need some advice.

Thanks very much for your help

See: I’m retiring on my 78th birthday, have more than $200,000 in savings and share expenses with my 80-year-old boyfriend. Will I be OK?

Dear reader, 

I’m so glad that despite your employer not offering a retirement plan you are so determined to put money away for the future. That’s great, and a wonderful example for your son. 

Although it is unfortunate that you do not have access to an employer-sponsored retirement plan, you’re far from alone. One option is to diversify the types of investment accounts you have. 

You mention having individual retirement accounts, but you could look into opening a Roth IRA, which is funded with after-tax dollars. There are income restrictions depending on your adjusted gross income and tax filing status, so you’ll need to check that you’re eligible, but based on your take-home pay, that shouldn’t be a problem. “I would start there,” said Chris Hardy, a certified financial planner at Paramount Investment Advisors.  

Another option is a Health Savings Account, which typically is available with high deductible health plans. These accounts have triple the tax advantages, because the money contributed, invested and distributed is tax-free if used for qualified health expenses. The money need not be used in the year it was contributed, which means you could let the account balance grow through the years and use it for eligible expenses in retirement. 

Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey 

A taxable brokerage account is another potential option for your investments. Many retirement accounts, including traditional IRAs, have a 10% penalty for funds withdrawn prior to age 59 ½ (the rules are a bit different for Roth accounts — for example, the individual’s own contributions are always available to them — and there are exceptions to this rule for traditional accounts and Roth accounts as well). 

“As you want to retire about 10 years before that age, building up a taxable brokerage account would be very useful so you have assets much easier to access without full tax and penalty being due,” said Brian Behl, a certified financial planner at Behl Wealth Management. With taxable brokerage accounts, investors pay tax on dividends and interest received and then capital gains on the sale of any appreciated investments. 

So those are a few possibilities for the investment vehicles you could use outside of an employer-sponsored account. Now think about how much money you’ll actually need for retirement. 

“At the core of any retirement strategy is determining cash flow needs,” Hardy said. “He will need to determine what is needed to cover fixed expenses and then what would be needed for those discretionary items (i.e., travel, newer vehicles, ‘stuff’).” After assessing the estimates for these expenses, you can calculate the sources of your income — your savings, any pensions, Social Security benefits and so on. 

One rule of thumb is the 4% rule, which is withdrawing 4% of your nest egg every year in retirement to cover your living expenses, Hardy said. For instance, someone with $1 million in retirement savings would withdraw $40,000 every year. Keep in mind, rules of thumb are just general principles — they do not work for everyone and there are numerous, personal factors that could alter how efficient they are in someone’s retirement calculations. 

Having the mortgage paid off would be a huge benefit to you, said Hank Fox, a certified financial planner. “That would eliminate a large debt and also increase his cash flow by the amount of his current mortgage payment,” he said. 

There’s also the option to refinance to a mortgage with a lower interest rate, but you should do a cost-benefit analysis of if that really makes sense for your personal situation if and when you consider it. 

You will also be in a slightly different situation if you were to retire at age 50, because you’d have more than a decade to go until you can claim your Social Security benefits and 15 years away from Medicare coverage. Before you retire at any early age, think carefully about how you’ll pay for your medical expenses and what health insurance coverage you’ll have during that gap, such as something offered on a state insurance exchange. 

“Health insurance is one of the biggest concerns (and expenses) for all of my clients looking to retire prior to age 65 when they are eligible for Medicare,” Behl said. Having money set aside in taxable brokerage accounts could help in this arena too — those distributions don’t count as ordinary income, which keeps your income relatively low and thus potentially allows you to qualify for subsidies on insurance exchanges that would lower your premium costs.

Also see: I’m a 55-year-old single mom adopting a teenager. I have $550,000 in my retirement account, make $295,000 a year but would like to retire early. Can I?

Because you’re a single dad, I feel compelled to mention estate planning needs. This is never a fun aspect of planning, but it is so important to ensure the safety and security of your child in the event of an emergency. 

“Something else to consider is where his son fits into the plan,” Fox said. Think about who would act as caretaker if an unfortunate event were to happen before he becomes an adult, and how your assets are set up so that they pass on to him if that’s what you want. Review your beneficiary designations, create a will, have a power of attorney and healthcare proxy written up on your behalf and make sure everything is exactly as you want it. 

The fact that you are the primary care provider for your son is also a reason to ensure any medical, disability and life insurance coverage is appropriate, as that would assist in providing lost income for childcare expenses in the event of an emergency, Fox said. 

I will leave you with this. Retiring at an early age sounds like a dream for many people, but you’ve already touched on a very realistic outcome — being bored with no job. Since you’ve already come to terms with the fact that you might not be happy leaving the workforce, even if you’re financially capable of retiring, start thinking about what this next chapter could look like for you. The concept of retirement has changed dramatically in recent years, and many Americans are now pursuing something called “financial independence,” which means they have the economic means to leave the workforce, but they take it as an opportunity to pursue a passion or a hobby or a dream instead. 

A part time job, or even a lower-paid one in a field you’re really interested in, could possibly give you health insurance too. 

“Many folks approach retirement as the finish line to a productive life,” Hardy said. “We call that ‘retiring from’ something instead of ‘retiring to’ something. Most people in the former group end up greatly disappointed with what they thought retirement would look like, and some even experience a level of depression.” 

Take the time to weigh your options — would you want to do consulting work in your field? Go back to school to learn a new trade? Take up a hobby? Try volunteering for a cause close to your heart? Pick up and travel the world? Or juggle a few side gigs that bring you joy? What you decide will also play a role in how much money you need saved before you’re ready to retire, and potentially even bring in more income in your retirement, but make a plan for your early retirement before going through with it. 

“Some clients also enjoy working more after they reach financial independence knowing they could ‘retire tomorrow’ if they wanted,” Behl said. “It makes their work an optional choice rather than a necessity.” 

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