Early retirement is a goal many of us may dream of—but before jumping out of the workforce head-first at 55, it may be prudent to weigh the pros and cons of doing so. Continue reading below for a brief and informative list of the benefits, consequences, and a satisfactory middle ground when considering retiring early.
The Benefits of Early Retirement
Mental or physical health benefits: If your job is especially taxing, it may be beneficial to your mental and/or physical health to retire early. Studies have suggested that working long hours and overtime frequently can have long-term effects on our mental and physical health.[1] If this sounds like your job, it’s only natural to want to rush into retirement.
Deepened personal relationships: The additional free time retirement offers will provide you with more time to spend with your loved ones. Time with our friends and family has been suggested to decrease feelings of loneliness.[2]
More time to travel while you’re young and healthy: Most people are familiar with the age-old conundrum of travel. When you’re young, you lack the finances to do so, but you possess the energy required. Conversely, as we age, we gain access to more disposable income, but our corporeal facilities suffer. There’s a fine balance to traveling while you have the money and the physical ability to, and early retirement may allow you to find that balance.
The Consequences of Early Retirement
Impacted retirement accounts and Social Security benefits: Retiring early means your retirement accounts will have less time to grow and yield potential earnings. In addition to this, you must be 62 years or older to start collecting Social Security retirement benefits. You will also receive more if you wait until your full retirement age, which is determined by your birth year.[3] Retiring before 62 will mean you won’t have the supplemental income of social security for several years, which may be an important factor to keep in mind.
Early withdrawal penalties: In addition to losing out on potential earnings by collecting withdrawals from your retirement accounts prematurely, it may also be important to consider early withdrawal penalties. You’ll be faced with a 10% early withdrawal fee in addition to regular income tax on the withdrawal amount.[4]
Loss of health insurance: Excluding those with certain disabilities, you are required to wait until you’re 65 or older to qualify for Medicare. Retiring before this will mean you’ll be on the hook for all medical expenses. At that age, that may be expensive.
A Compromise
Retire from your full-time job early and consider taking up a part-time job somewhere or simply ask for less hours in your current position.
In the United States, you must work at least 30 hours per week in order to qualify for employer-sponsored healthcare.[5] Consider working 30 hours a week to qualify for your employer’s healthcare plan, so you’re not stuck footing the entire bill until you qualify for Medicare at 65.
Reducing your hours would also provide you with more free time throughout the week to spend with your loved ones or travel.
The opinions contained in this material are those of the author and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reputable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.
[1] Wong, Kapo, et. al. “The Effect of Long Working Hours and Overtime on Occupational Health: A Meta-Analysis of Evidence from 1998 to 2018.” International Journal of Environmental Research and Public Health, 13 Jun 2019. https://pmc.ncbi.nlm.nih.gov/articles/PMC6617405/. Accessed 20 May 2025.
[2] Hoffa, Rebecca. “Stay connected: A New Year’s resolution to spend more time with loved ones could boost health.” Purdue University, 21 Dec 2021. https://www.purdue.edu/hhs/news/2021/12/stay-connected-a-new-years-resolution-to-spend-more-time-with-loved-ones-could-boost-health/. Accessed 20 May 2025.
[3] “Starting Your Retirement Benefits Early.” Social Security Administration, n.d. https://www.ssa.gov/benefits/retirement/planner/agereduction.html. Accessed 20 May 2025.
[4] “What if I withdraw money from my IRA?” Internal Revenue Service, n.d. https://www.irs.gov/newsroom/what-if-i-withdraw-money-from-my-ira. Accessed 20 May 2025.
[5] “Identifying full-time employees.” Internal Revenue Service, n.d. https://www.irs.gov/affordable-care-act/employers/identifying-full-time-employees. Accessed 20 May 2025.
