• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

The problem with retiring early

Not only are you retiring five years before Social Security benefits can kick in, but 10 years before you could collect maximum benefits kick at 67. That means you’re reducing your potential monthly Social Security benefits by 30% for life. Medicare won’t kick in till you’re 65, so unless you can hop onto a partner’s plan, you will have to budget for the cost of health insurance for eight years.

You might also face a 10% early withdrawal penalty for taking money out of an IRA or 401(k) before you turn 59.

But even if you have penalty-free access to your entire $1.3 million nest egg, you still need to make it last. Financial experts have long recommended that you withdraw 4% of your savings in your first year of retirement and adjust future withdrawals for inflation. That strategy, known as the 4% rule, is designed to ensure your savings last 30 years. But increasingly, financial advisers like Suze Orman advise against it.

For one thing, if you’re retiring in good health at 57, with a family history of longevity, you may live longer than 30 years.

Reducing your withdrawals to 3.5% of your $1.3 million portfolio each year will produce an annual income of $45,500 before Social Security kicks in, but the average American aged 65 and over was spending $52,141 a year as of 2021, according to the Bureau of Labor Statistics.

There are some ways to ease into retirement, but you have to plan carefully.

Retire richer: The secret to building wealth faster

Most people miss out on key opportunities to grow their wealth. Partnering with the right financial advisor can help you secure a brighter future. Learn how to make your money work harder for you today.

Discover the secret

Make sure you're covering all of your bases

First, create a budget that includes health coverage costs to ensure the numbers work. You might be able to lower your expenses if you’ve paid off your home, can downsize or move to a more affordable community. . Set aside at least two years of savings in case the stock market dips and hits your portfolio hard — this can also cover emergency medical bills and home and car repairs.

You can also consider quitting your full-time job to take a part-time job or side hustle until you’re 65.

With so much to consider, you may want to meet with a financial adviser to go through retirement goals and invest your savings to generate growth with less risk.

Sponsored

Meet your retirement goals effortlessly

The road to retirement may seem long, but with Advisor, you can find a trusted partner to guide you every step of the way

Advisor matches you with vetted financial advisors that offer personalized advice to help you to make the right choices, invest wisely, and secure the retirement you've always dreamed of. Start planning early, and get your retirement mapped out today.

Maurie Backman Freelance Writer

Maurie Backman is a freelance contributor to Moneywise, who has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.

†Terms and Conditions apply.