Retirement

5 Potential Problems with Retiring Early

By Barber Financial Group

June 11, 2021

5 Potential Problems with Retiring Early


Key Points – 5 Potential Problems with Retiring Early:

  • 5 potential problems with retiring early
  • Things you can and can’t control in retirement
  • 7 minute read

5 Potential Problems with Retiring Early

You may have seen the acronym FIRE (Financially Independent Retiring Early) thrown around in the past few years. On paper, the FIRE lifestyle may seem incredibly attractive to many. Work hard in your 20s, 30s, and even 40s to make as much money as possible in as short a period as possible. Make sacrifices to make each dollar go farther. Save, save more, and, finally, retire as early as possible. 

That may be an oversimplification, but there are problems with retiring early that many people don’t realize can throw your plan off the rails. So, with that, let’s review five potential problems with retiring early, and how you can plan for them.

1. Risk of Boredom

Great, you made it to the retirement finish line early. Now what? Well, first off, you’re probably insanely happy. That happiness may last a while but can ultimately be fleeting. You still have your entire life ahead of you, after all. And the earlier you retire, the more time you have to fill. 

You may think boredom isn’t a real risk, but it is, and it can impact your overall health. It can make that early retirement worthless if your life expectancy drops along the way. Dark, I know, but it’s something to consider before retiring early. 

How do you mitigate boredom now that you’re no longer working? Find regular activities you can do that enrich your life, of course! It seems so simple, but again, you’re going to have A LOT of time on your hands. Fill that time doing things that consistently bring you happiness. Maybe you like to volunteer, spend time with your family, travel, garden, or other hobbies. 

If you’re unsure where to start, pick something you think you might enjoy and give it a go! Trying something new can bring a whole new meaning to your retirement.

The point is, don’t let your precious retirement years waste away. The earlier you retire, the more time you give yourself to get bored. So, do what makes you happy, and plan ahead to fill your time. Yeah, it’s simple, but structuring your day can be more challenging than you might expect when you’re no longer working. Fight the boredom off with a stick by planning your time even before you retire.

2. Lack of Affordable Health Care

If you plan to retire early, you need to have a plan for health care coverage. Unfortunately, health care doesn’t come cheap, and without an employer to support some of the cost of coverage, it can get out of hand quickly.

Medicare doesn’t begin until age 65. So, if you retire before your 65, what do you do? You need insurance during that coverage gap. It’s essential to have a solid plan to make sure your savings can cover your future health care costs. Applying a substantial inflation rate to your yearly health care expenses so that you can ensure you don’t run out of money due to health care expenses is crucial. 

Outside planning ahead, make the most of shopping for coverage. Look for subsidies provided under Obamacare, and shop around at least annually to make sure your rates stay as affordable as possible. 

For more information on health care in retirement, check out our on-demand webinar from CFP® Jason Newcomer, Health Care Costs in Retirement. You can also learn more about Medicare on our podcast, The Guided Retirement Show™. Episodes 67, and 22 are all with Medicare expert Tom Allen. 

3. The Potential for Less Social Security Income

Social Security is generally the foundation of someone’s retirement income. When retiring early, it can be attractive to claim your Social Security as early as possible so you can capture that income as soon as it’s available. But you could be leaving even more money on the table by not properly planning your Social Security claiming strategy. 

By optimizing your claiming strategy, you can maximize your Social Security benefits over your lifetime. Many don’t realize that Social Security can impact a plethora of other retirement factors like taxes. You can learn more about claiming Social Security in our Social Security Decisions Guide or by watching our on-demand webinar with CFP® Will Doty, called Claiming Your Social Security.

4. Issues Accessing Retirement Accounts

Imagine retiring early only to find out you can’t get to a large portion of your retirement savings. Well, a common issue when retiring early, specifically before 59 ½, is accessing money in retirement accounts. Depending on the type of account, like an IRA, there may be restrictions or even withdrawal penalties. 

It’s vital to consider which accounts will be available to take withdrawals from in the period before you turn 59 ½ so you can avoid such penalties. If you were to retire at 55, you could take a penalty withdrawal from your 401(k). However, if you roll that into an IRA, you will lose that penalty-free withdrawal option. So, when retiring early, it’s crucial to plan ahead to make sure you’re not making potentially costly mistakes. 

5. Extending Your Retirement Savings 

By retiring early, you could be putting yourself in the position to fail. Likewise, if you work too long, you could miss out on your retirement savings altogether. It’s a tricky balance. However, you can discover that balance with some savvy prior planning. 

Retiring Too Early

The reason you could be setting yourself up for failure by retiring early is that you’re extending your retirement savings over a potentially longer period. 

Many individuals begin thinking about early retirement in some of the highest-earning years of their career. What does that mean? They’re potentially going to leave more retirement savings on the table than ever. You would be limiting your time to save more for retirement during the years when you could save the most. 

While this might be the best solution for some, it’s definitely something everyone needs to think about before retiring early. The risk of running out of money in retirement is a very real risk. You need to be sure you’re covered before jumping out of the working world. 

Understand What You Can and Cannot Control

When you’re thinking about retirement, it’s important to understand the things you can and cannot control. You obviously need to pay attention to all of the factors, but there is no point in crying over spilled milk when it’s outside of your realm of control. 

Things You Can’t Control

Often, the biggest disruptors in someone’s retirement plan can come from outside forces. Investors can’t control market volatility. It seems crazy to think one could. So, why is it that so many focus on the market when they should be focusing on the entire plan? 

Another component outside of your control is legislation. Sure, you can vote and make your voice heard, but do you ultimately have control over legislation? Unfortunately, no, we do not. Instead, you have to prepare for changes to the law with a team of professional planners to support you. You can’t control the law, but you can plan with the changes as they come. 

An additional factor you can’t control if you retire early is inflation. The economy and the markets are not within your control, and inflation joins that club as well. The great thing about inflation is that you can plan for it by making sure your plan to retire early includes a higher inflation rate than actually expected. That way, if inflation does take off, your plan is ready for the change. 

Things You Can Control

As there are things you can’t control when you retire early, there are things you can control. You can control your risk exposure, making sure you’re not putting more of your money at risk than you need to for your retirement plan to be successful. Greed is not your friend when you’re living off your retirement nest egg. 

A more obvious thing you can control when you retire early is your spending. Here it comes, the B-word. You need a budget! Sure, you’re about to retire, which likely means you’re older and wiser than most. Why do you need a budget now? 

Well, retiring is different than working. Income and spending are different in retirement too. You need a whole new budget in the post-retirement world. Make sure you have one when you retire because do you want to run out of money and go back to work at the end of the day? I bet not. 

You’re Ultimately in Control of When You Retire

Finally, and potentially even more obvious than spending, is that you can control when you’re going to retire. 

“But this whole article is about retiring early!” 

Yes, it is, but if you run your plan through our Guided Retirement System™ and it says you should work a little longer to ensure you’re ready to have the retirement you’ve dreamed of, isn’t that worth working a little longer?

On the other hand, if your plan said you could retire today and do all of the things you wanted to do in retirement, wouldn’t you?

We can help you figure out if you need more time in the working world or financially independent already and you don’t even know. Whether you’re about that FIRE lifestyle or just want to know if you’re there yet, schedule a complimentary consultation below with one of our CERTIFIED FINANCIAL PLANNER™ Professionals. They’ll walk you through our process and help you understand where you are in your journey to and through retirement. 


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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.