One bad early retirement blunder could cost you $1 for every $2 earned — here's how to avoid mistakes now that could trip up your golden years

These reductions can add up, delaying or reducing your payments while you’re still working. It’s just one of the landmines waiting for people who don’t do their homework before leaving the workforce.

The Social Security timing trap

The appeal of claiming at 62 is real: you get money sooner, potentially for years longer. But it comes at a permanent cost. The SSA confirms that workers born in 1960 or later who claim at 62 receive only 70% of their full retirement benefit; a 30% permanent reduction follows every payment for the rest of their lives (1).

Early claiming makes sense for some. For example, if you’re in poor health, have a shorter life expectancy or need income to cover expenses until Medicare kicks in at 65, collecting at 62 may be financially prudent.

AARP’s analysis finds the “break-even age” — when waiting maximizes lifetime benefits — is usually around 78 to 80. If you don’t expect to live past that, claiming early might be smarter (2).

Problems arise when people assume they can collect benefits and keep working without limits. The $24,480 earnings threshold in 2026 applies to all wages, bonuses, and self-employment income. Pensions, investment returns, and Social Security itself do not count.

The silver lining: withheld benefits aren’t lost. Once you reach full retirement age (FRA), the SSA recalculates your monthly payment to credit back the months that were reduced. Still, the temporary cash-flow disruption can be significant for those who aren’t prepared (3).

The health care blind spot

Early retirees often face a harsh surprise: health care costs, especially if they retire before 65 and lose employer coverage before Medicare eligibility.

Fidelity’s 2025 Retiree Health Care Cost Estimate projects $172,500 in medical expenses throughout retirement for a 65-year-old retiring in 2025, not including long-term care. Costs have risen more than 4% in just one year, and for early retirees, expenses can be even higher (4).

Bridging the gap to Medicare at 65 usually means buying ACA marketplace coverage, joining a spouse’s plan, or extending employer coverage through COBRA. Each option has cost and coverage implications worth mapping out well before your last day on the job.

What to do while you still can

If retirement is on the horizon within the next few years, you have limited time to make informed choices. Early retirement can be financially smart for some, but the goal is to decide with clear eyes, not assumptions.