Things No One Tells You About Early Retirement

Even if you love your job, there are times when you’d rather be doing something else. For many of those who do take the plunge, the reality of early retirement can turn out to be far different than the fantasy.

Here are a few things to consider before you decide to retire:

Healthcare is Expensive

Medicare doesn’t start until age 65. Until then, you’ll need an alternative, and that’s not cheap. The current law, the American rescue Plan Act of 2021, says your insurance costs can’t be more than 8.3% of your household income.1 For example, a person with a household income of $50,000, a mid-level plan would cost $346 per month, or $4,150 per year.

Dipping Into Your Nest Egg Can Be Costly

If you retire before 59 ½, you will usually pay a 10% early withdrawal penalty from most tax-deferred accounts, such as IRAs and 401(k) plans. Unless you have a Roth IRA, which is funded with after-tax contributions, you’ll owe income taxes on the amount you withdraw from traditional accounts funded with pre-tax contributions. To illustrate, if you withdraw $20,000 from an IRA before age 59 ½ and you are in the 15% federal tax bracket, you will pay $5,000 in taxes and penalties, leaving you with $15,000.


With improved healthcare, many people are living longer than the national averages. According to the Society of Actuaries, a woman who retires at 55 will have to make her savings last for 28.6 years on average, compared to 20.4 years if she retires at 65. A man who retires at 55 will have to stretch his savings for 25.1 years, rather than 17.8.

You’ll Spend More Money Than You Think

As a rule of thumb, expect to spend about 80% as much in retirement as you do when you work. This applies in the early years of retirement, when you’re younger, healthier, and newly freed of work. Moreover, don’t be surprised if you spend as much as or more than you did before retirement.

Housing Expenses Don’t Retire When You Do

Retiring without a mortgage is a common goal for would-be retirees, but it’s a goal that many fail to meet. According to a 2019 American Financing survey, 44% of retired homeowners between 60 and 70 still carry a mortgage.2 Even if you have paid off your mortgage, other expenses such as maintenance, utilities, and property taxes don’t go away.

Extra Income Can Be Hard to Come By

Working in retirement might not be as simple as you think. While 74% of workers plan to work for pay in retirement, according to a 2020 EBRI study, just 27% of actual retirees reported working for pay.3 Even part-time work can be a challenge.

You Will Have a Lot of Spare Time

When you retire, you have a 40-hour gap in your week that you need to fill. To combat this, make sure you have enough activities to keep your body, mind, and spirituality occupied. Think hard and for the long-term before you retire, and come up with a plan in advance.

You May Need to Make New Friends

If you retire in your 50s, you may find that your current friends aren’t around much because they still have full-time jobs. While you have the luxury of catching a matinee or playing a round of golf on a Tuesday, those in your social circle who are working 9-to-5 don’t.

Retirement Can Be Tough On Couples

Retirement is a major life transition. Most retired couples do not look like those pictured in ads and commercials. You’ll have to decide how work around the house will change. Further, you need to look at things you can do together and what you can or want to do by yourself.

  1. https://www.cms.gov/newsroom/fact-sheets/american-rescue-plan-and-marketplace
  2. https://www.americanfinancing.net/reverse-mortgage/mortgage-options-after-retirement
  3. https://www.ebri.org/docs/default-source/rcs/2020-rcs/2020-rcs-summary-report.pdf?sfvrsn=84bc3d2f_7

Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. The Retirement Income Store® , LLC and Sound Income Strategies, LLC are associated entities.

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