Retirement planning is something to consider if you want to stop working at some point in your life. A retirement plan allows you to live off of your savings. The IRS, and many employers consider age 59 1/2 to be the age at which retirement is acceptable and base retirement plans off of this age. You may also retire at 55, however, if you want to.
To get money from your retirement accounts prior to age 59 1/2, you must make withdrawals under the exceptions listed in IRS rule 72t. This rule contains the rules for withdrawal and imposes penalties for withdrawing money from your retirement account prior to 59 1/2. However, the exception to this rule is if you make withdrawals based on your life expectancy in equal amounts every year for at least five years or until you're age 59 1/2, whichever comes later.
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You get to retire before your normal retirement age. This can be especially beneficial if you want to travel the world or start a business or do something other than work where you are working now. You'll be able to draw your retirement savings without a penalty and you should have enough to live on if you have a substantial savings and have met your retirement savings goals.
The disadvantage here is that retiring early may not yield as much money as you could have if you had waited a few years. Also, if your retirement savings is not large enough, you may run out of money before you die. On top of that, you must make the correct withdrawal based on your life expectancy using IRS mortality tables. Otherwise, you will be assessed a penalty of 10 percent on your withdrawals as though you made an improper early withdrawal from your retirement account. You also won't have your Social Security income to rely on at this age. So, you should be able to live completely off of your savings until age 62, when you qualify for Social Security.
You should consider waiting until age 59 1/2 to retire. This gives you a few more years to earn interest on your savings and build up a larger retirement savings. You'll end up with more income if your savings grows accordingly and you will reduce the risk of running out of money during retirement, all other investment factors being equal.