Want to Retire Early? Think Again

“Early retirement” often means leaving the workforce at age 55—but most of us do not take this path. Unless you’re lucky enough to have a full pension with benefits that kick in that early—if you’re retiring from the military, for example, or from work as a police officer or firefighter—you’ll probably need to work until at least age 67 to accrue enough money for a comfortable retirement.

Of course, you may want to work even longer, just to keep your mind and body active—or because you didn’t save as much as you need. Here are eight reasons why retiring early may not be a good idea.

Key Takeaways

• Early retirement requires a substantial nest egg that most people do not have.
• As life expectancy increases, early retirement means a much longer retirement, which means you might risk running out of money before you die.
• With early retirement, you’ll need to pay healthcare costs yourself until Medicare kicks in.

1. Not Enough Savings

There are many reasons why you don’t have enough saved for an early retirement. Maybe you started your family later than most, so that now you’re nearing retirement age, your children are in college, or are even younger than that. You also might have elderly parents who need help paying high medical bills or nursing home fees. Maybe you still have a mortgage and credit card debt. If you’re planning to stay in your home and maintain your existing standard of living, you need to take a cold, hard look at your expenses and the size of your nest egg before deciding whether to retire early.

2. Living Longer than Expected

An estimate of your life expectancy is listed on your Social Security statement. You can also get it by logging on to the Social Security website and entering your gender and birth date. However, your personal life expectancy might differ for a variety of reasons. Let’s say your family has a history of longevity, and you look after yourself—eating a healthy diet, getting plenty of exercise, and taking your medications as prescribed. You have to factor that into how long your savings will last.

According to the Social Security Administration, about one in three 65-year-olds today will live past age 90, and one in seven will live past age 95. The average monthly benefit for a retired worker as of October 2024 is $1,924.35, or $23,092.20 a year. For retirees with no savings and no pension, it may be hard to meet basic living expenses on Social Security income alone. Therefore, you might want to wait until age 70, when you can collect your maximum Social Security benefit.

3. Increased Mortality

A 2016 paper published in the Journal of Public Economics found a link between early retirement and mortality rates, especially among men. Around one-third of Americans start claiming Social Security benefits in their first month of eligibility when they turn 62.

“The rise in mortality is closely connected to changes in labor force participation, implying that mortality increases by approximately 20 percent among those who stop working because Social Security is available,” the paper states.

4. Bye-Bye Bucket List

The more you put away, the more you can pamper yourself in your retirement years. Sure, Cape Cod is nice, but what about going on safari in Tanzania, taking a Caribbean cruise, or sailing the Mediterranean? If you stay in the workforce, you could grow your 401(k) savings significantly—and then live out your dreams.

Important

Taking Social Security benefits at 62, the earliest possible time, means that you will receive only 70% of your full retirement benefit.

5. Reduced Social Security

If you start collecting Social Security at the earliest opportunity, at age 62, you won’t receive your full benefits. In fact, you’ll only receive about 70% of your full benefits. 

Your full retirement age depends on your birth year. For anyone born in 1960 or later, the full retirement age is 67.

However, you don’t have to collect benefits at your full retirement age, either. Waiting even longer—up to age 70—will give you a higher monthly benefit. (There’s no incentive to wait past age 70.) 

Your Social Security statement tells you what you can expect to receive at age 62, 67, and 70. If you quit work before 62, those projected amounts may change. That’s because the amount is based on your 35 highest-earning years. (And it’s worth remembering that generally, your later years will be your highest-earning years.)

If you started late in the workforce or didn’t work consistently—say, you took some years off to raise children, or you came to the United States partway through your career—you may not have hit the magic number of 35. The years you don’t work, or have reduced income, will be factored into your benefits. So be sure to talk to the Social Security Administration to get the details for your particular case.

6. Reduced Spousal Benefits

Let’s say you’ve always earned more than your spouse. If you die first, the Social Security benefits that you’re collecting will go to your surviving spouse for the rest of their life—as long as you’re age 62 or older. (The exception is if your spouse is caring for a child who is under the age of 16 or disabled. In that case, your spouse will get benefits sooner.)

If you’ve started collecting before your full retirement age, you’ll be getting a lower amount—and that’s what your surviving spouse will then collect.

“Early claiming results in lower benefits over longer lifetimes: lower benefits for the earner, lower spousal benefits, and lower survivor benefits,” says Charlotte A. Dougherty, CFP, of Dougherty & Associates, in Cincinnati, Ohio.

7. Unfulfilled Needs

That early retirement agreement with your employer could be less lucrative than it looks. Before you sign the offer, examine the details carefully. Is the amount enough to see you through? If you’ll need to tap into your 401(k) before you reach age 59½, be aware that there will be a 10% tax penalty for the early withdrawal (unless it’s a qualified hardship withdrawal). Is adequate medical coverage included?

If you have to buy COBRA insurance until you’re eligible for Medicare, that won’t come cheap. Buying Affordable Care Act insurance through the health insurance marketplace may not be inexpensive either, depending on your financial situation. What will happen to health insurance over the next few years is also much in doubt. You’ll probably need a financial professional to walk you through the options.

8. Difficulty Finding a New Job

If you change your mind after you take early retirement and want to return to the workforce, it probably won’t be easy. Whether you quit your last job or were laid off, finding new employment when you’re over 50 can be a struggle. If you do manage to snag a job, it might not pay as well as the one you left.

What Are the Contribution Limits for 401(k)s?

The most you can contribute to a 401(k) in 2025 is $23,500. (In 2024, it was $23,000.) For those age 50 or older, it’s $31,000 in 2025. (In 2024, it was $30,500.)

What Are the Contribution Limits for IRAs?

For IRAs, the most you can contribute in 2025 is $7,000. (In 2024, it was also $7,000). If you’re age 50 or older, you can contribute an additional $1,000 as a catch-up contribution for both years.

When Can You Withdraw from Retirement Accounts Without Penalty?

The earliest you can withdraw from retirement accounts without penalty is age 59 ½. Otherwise, you’ll need to pay a 10% tax penalty (unless it’s a qualified hardship withdrawal).

The Bottom Line

There’s a lot to consider as you approach retirement and decide when to stop working. If you have questions, just ask the experts: Social Security Administration agents, tax consultants, and financial professionals.