Commonly referred to as your golden years, retirement is a time to kick back, relax, and enjoy your newfound freedom — well-earned after decades of hard work. It’s no wonder many people want this time to begin as soon as possible. But whether that’s a good idea will depend on your financial situation. If you’re planning to stop working early, it’s essential to have an understanding of how much money you really need to safely retire. For most people, that number amounts to more than 30 times their annual expenses.

Financial services firm Fidelity Investments says that, to comfortably retire early, you’ll need enough savings to cover 33 times your annual expenses, assuming a conservative yearly withdrawal rate of 3%. For example, a 45-year-old with $75,000 in yearly expenses will need to save $2.475 million and be able to withdraw $74,250 during the first year of retirement. Typically, suggested withdrawal rates are higher when retiring later. As a rule of thumb, many financial planners use a 4% withdrawal — increasing each year to account for inflation – while some use 5% as a target.

Determining an estimated lifespan is perhaps the most significant unknown factor when determining how much you need for retirement, and if you’re retiring early, this can be even more of a challenge. To avoid the risk of running out of money, financial companies often assume life expectancies will run into the mid-90s. Charles Schwab Corp, for instance, estimates a lifespan of 92 years old for men and 94 for women, barring any health issues.

If you’re planning to retire before the age of 59 years and 6 months, there are some other financial factors you will need to consider. For retirement accounts such as 401(k)s, 403(b)s, and IRAs, there is a 10% additional tax if you withdraw funds before that age — though there are some exceptions to this rule. With employer-sponsored retirement plans, you could avoid the penalty if you’re 55 or older when you leave a job, whether it’s voluntarily or involuntarily. If you’re a public safety worker, the age may be even lower.

Also, if you’re planning to retire early, you won’t be eligible to receive Medicare or Social Security benefits for a few years, which will impact your finances. The age at which you can qualify for Medicare is 65 unless you have certain disabilities, in which case you may start receiving it earlier. For social security, 62 is the earliest age you’re able to begin collecting. Even if you start withdrawals then — rather than waiting until full retirement age – your monthly payments will be discounted. For instance, if you were born after 1960 and expect to receive $1,000 in Social Security per month, that number will be discounted to $700 if you start receiving payments at 62 rather than waiting until the full retirement age of 67. 

If you’re hoping to retire early, there are some steps you can take to set yourself up for success. You should start saving for retirement as early as possible to ensure you’ll have adequate savings by the time you retire. Also, take advantage of any employer-sponsored retirement plans. If your employer offers matching contributions, try to contribute enough to get the full match since that’s essentially free money. You should also consider a retirement account in addition to what your employer offers, such as a ROTH IRA, in which you can deposit after-tax funds that can be withdrawn tax-free when you reach the age of 59 years and six months.

To avoid penalties from early withdrawals, you should also have other savings accounts and investments you can access early in your retirement. Some investments you may want to consider include municipal bonds, which can provide you with tax-free income; index funds, which can generate income without taking on too much risk; and high-yield savings accounts, which will earn you the best yields on your savings. Real estate can also be a good investment if you’re planning to retire early, as income properties could either provide you with a regular revenue stream or be sold to help fund your retirement.The total value of these investments should be accounted for when determining whether you’ll have enough in savings to allow you to live comfortably throughout your golden years.