Consider These Drawbacks Before You Set a Goal to Retire Early

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FIRE, or Financial Independence, Retire Early, is a lifestyle movement that recently took the personal finance world by storm. It encourages you to build a cushy nest egg so you can comfortably retire in your 30s or 40s. However, leaving the corporate rat race while you’re still young isn’t all rainbows and butterflies. Consider these cons of early retirement before taking the plunge into a new chapter of life.

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1. Your Health Care Costs Could Go Up

“If you retire before age 65, you’ll not yet be eligible for Medicare. This means you’ll need to pay for more expensive private health insurance,” said Doug Carey, a Chartered Financial Analyst and owner of WealthTrace, a retirement and financial planning software.

According to Fidelity Investments’ 22nd annual Retiree Health Care Cost Estimate, a 65-year-old who retired in 2023 can expect to spend an average of $157,500 in health care and medical expenses throughout retirement. And if you’re retiring early, you may need more than that amount to cover unexpected medical expenses.

So, before ditching your 9-to-5 job, consider speaking with a licensed health insurance agent or a financial planner. They can help you figure out your health insurance coverage needs. Without adequate healthcare coverage, unexpected medical expenses can eat into your savings and derail your retirement plans.

2. Feelings of Social Isolation

Experiencing feelings of social isolation and loneliness is one of the more unexpected cons of early retirement.

“The workplace can provide social interaction and a sense of belonging,” Carey said. “Early retirement can disrupt these social connections, leading to feelings of loneliness and isolation, especially if your social circle primarily consists of colleagues or work-related friends.”

Feeling lonely isn’t just a downer — it’s also bad for your health. According to the Centers for Disease Control and Prevention (CDC), social isolation is associated with around a 50% increased risk of dementia, 29% increased risk of heart disease and a 32% increased risk of stroke.

So, before heading into retirement, make sure you identify some hobbies and ways to stay connected with others. For example, you could join social clubs and community organizations. You also could volunteer for causes you support or workout with a buddy to stay active and social.

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3. Increased Longevity Risk

Humans are living longer thanks to advances in tech and medicine — many live well into their 80s and 90s.

“While this extension of life can bring many opportunities, it also introduces challenges to your financial plan in early retirement,” said Chad Gammon, a financial planner at Arnold and Mote Wealth Management.

“With increased life expectancy and longer retirement windows, there is an increased risk of running out of money later in retirement,” he warned. So, if you haven’t already, talk to a financial advisor or financial planner to help you prepare for an extended retirement.

A general rule of thumb for determining the size of your nest egg is to multiply your planned annual retirement expenses by 25. Let’s say you want to pull out $40,000 annually during retirement, you’ll need to have $40,000 x 25, which is $1 million.

But here’s the catch: this rule usually assumes your retirement years only last about 30 years. One of the cons of early retirement is that you’ll need way more saved up to financially support yourself after saying goodbye to the corporate world.

4. You Might Miss Out On Your Peak Career Earnings

“Women’s earnings generally peak at about age 39, and men’s at about 48. In other words, you’re likely to earn the most in your 40s and 50s,” said Eric Croak, a Certified Financial Planner, Accredited Wealth Management Advisor, and the President of Croak Capital, a wealth management firm in Toledo, Ohio.

“Think about it: you spend around 16 to 20 years in school, then work for just 10 to 15 years, and decide to retire before 40? That’s a lot of untapped potential,” he added.

Plus, if you return to work after enjoying the retirement lifestyle for a while, it might not be easy. The gap in your employment history could make employers have second guesses.

Sure, early retirement sounds dreamy, but consider whether you’re ready to say no to those peak career earnings. In some cases, it may be worth sticking around for a few extra years to beef up your retirement fund so you can enjoy a more comfortable retirement.

5. Your Social Security Benefits May Be Lower

Another one of the cons of early retirement is that you may receive smaller Social Security checks.

“If you claim benefits before reaching full retirement age (between 66 and 67), you’ll face early filing penalties, reducing your benefits by a significant amount over time,” Croak said.

It’s also worth noting that Social Security benefits are typically calculated using Average Indexed Monthly Earnings (AIME). This average is based on your highest 35 years of earnings. “If you retire early, you might not have 35 years of income, which means zeros get factored into your average, potentially lowering your benefits even more,” Croak warned.

Because your Social Security benefits depend on the age you retire, early retirement may not be the best idea if you want to receive maximum benefits. According to the Social Security Administration, if you retire at full retirement age in 2024, your maximum benefit would be $3,822, but if you retire at 62 in 2024, your maximum benefit would be only $2,710. On the other hand, if you retire at 70 in 2024, your maximum benefit jumps up to $4,873.

6. Your Retirement Accounts May Not Be Easily Accessible

“Retirement accounts are meant to be used in normal retirement ages, which the IRS says is 59.5. If you have saved a good chunk of money in retirement accounts such as an employer 401k or an IRA, you may have to pay penalties to access that money earlier,” said Stephen Kates, Principal Financial Analyst for and a former wealth management advisor.

Typically, if you withdraw funds from qualified retirement accounts before the age of 59 and a half, you may face a 10% early withdrawal penalty imposed by the IRS. Note that this penalty is in addition to any income tax owed on the withdrawn amount.

Let’s say you retire at 45 and decide to withdraw $20,000 from your traditional IRA. You’ll incur a 10% penalty of the withdrawn amount, which is $20,000 x 10% = $2,000. You’ll also owe income tax on the $20,000. Assuming your marginal tax rate is 22%, you’d pay Uncle Sam $20,000 x 22% = $4,400 in income tax. In total, you’d owe $2,000 in early withdrawal penalty plus $4,400 in income tax, equaling $6,400.

Don’t Rush Into Retirement

While retiring in your 30s or 40s may sound nice when you’re tired of the corporate rat race, rushing into it unprepared is never a good idea. Before bidding farewell to your salaried job, work with a financial professional and discuss the cons of early retirement. They can help you map out your finances to ensure you’re making a well-informed decision.

Jamela Adam is a personal finance writer covering topics such as savings, investing, mortgages, student loans, and more. Her work has appeared in Forbes Advisor, Chime, U.S. News & World Report, RateGenius and GOBankingRates, among other publications.