Early retirement can give you more time to enjoy your hobbies, friends, and family, but it comes with trade-offs. Namely, you need to figure out how to make your money last 30 or more years, which can be increasingly challenging as you age.

This article explains what early retirement means and how to do it sustainably. No matter when you step away from the workforce, we’ll help you assess the risks and opportunities and show how Gainbridge can support your retirement income strategy.

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What’s early retirement?

Early retirement means leaving the workforce before the traditional age of 65. Strategies vary from aggressive savings plans like FIRE to simply putting enough aside to step back a few years ahead of schedule. 

Technically, you can retire as early as you’d like, but your age directly affects which benefits you’ll be eligible to receive:

• 59½: At this age, you can begin withdrawing IRA and 401(k) savings penalty free from the IRS 10% early withdrawal penalty taxpenalty-free.
• 62: Social Security distributes benefits as early as age 62. But if you tap into this resource before 67, the government will permanently reduce your monthly payments. 
• 65: Medicare eligibility starts at 65, meaning early retirees need a plan to cover healthcare expenses before then.

Successful early retirement planning involves managing your savings and generating income other than traditional paychecks.

Pros and cons of early retirement

Before committing to early retirement, here are a few advantages and disadvantages to closely consider.

Benefits of early retirement

• More leisure time: Stepping away from full-time work allows you to do more of what matters — see the world, spend quality time with loved ones, and devote time to hobbies or creative pursuits.
• Improved mental health and stress management: Saying goodbye to long commutes, deadlines, and workplace stress can significantly improve overall well-being. For many early retirees, the lifestyle shift alone is worth it.
• New career or venture opportunities: Some people retire early from their main job but don’t quit working. They take on part-time roles, move to consulting, or start a small business. Early retirement often equals finding purpose without the pressure of needing a paycheck.

Cons of early retirement

• Smaller Social Security and retirement account payouts: Retiring before full retirement age reduces your monthly Social Security benefit, potentially by as much as 30%. You'll also have fewer years to contribute to retirement accounts, which may leave you with a smaller nest egg.
• Longer savings needs (20–30 years): In the U.S., the average life expectancy is about 79, longer if you're healthy. That means someone who leaves the workforce at 55 or 60 could need to fund three decades of living expenses. Without a solid plan, that extended timeline raises the risk of outliving your money. 
• Lack of structure: Work often provides purpose and social connection. Some early retirees experience boredom, loneliness, or a loss of direction without something meaningful to fill that space.
• Costly private insurance: Health insurance can be one of the biggest hurdles. Suppose you retire before Medicare eligibility at 65. In that case, you might need private coverage, which can easily cost $500–$1,000 per month or more, depending on location and coverage level. Premiums, deductibles, and out-of-pocket expenses can add up quickly, especially if you have ongoing health needs.

How to retire early: 5 key steps to take

Retiring before 65 takes more than just savings — it requires a comprehensive retirement strategy. If you're serious about stepping away from full-time work early, here are five key steps to help make that goal a reality. 

1. Build a larger nest egg

Early retirees need to fund more retirement years than average, possibly 30 or more. That means doubling down on your savings while you're still earning. Max out retirement accounts, and consider annuities to expand your investment base and secure a more stable retirement income. The earlier you start, the more you can benefit from compound growth and solidify peace of mind.

2. Plan for 30+ years of income

Creating a sustainable withdrawal plan is critical. Map out your income sources, including Social Security, retirement accounts, and annuities, and compare them to anticipated expenses. Your savings and continued income need to maintain your lifestyle, or at least the basics, for a successful early retirement. 

To stretch your savings, consider conservative withdrawal strategies like the 4% rule. But stress test your plan against long lifespans, inflation, and market volatility.

3. Budget for healthcare before Medicare

Healthcare is often the biggest wildcard in early retirement. Without employer-sponsored coverage or immediate access to Medicare, you’ll need a solid plan. 

Research private insurance options early. Explore ACA marketplace plans, COBRA if available, and high-deductible health plans paired with an HSA. While researching, keep in mind that costs can vary widely based on your age and location. 

If you're retiring as a couple, factor in coverage for both of you. Healthcare for two can rival or even surpass your housing expenses. 

4. Consider phased retirement or part-time work

You don’t have to quit work altogether. Freelancing or reducing your hours can give you more free time while preserving your savings. Many people also stay employed, even minimally, to stay mentally and physically active.

5. Reduce debt before exiting the workforce

The less you owe, the better. If possible, prioritize paying off high-interest debt, and consider eliminating large fixed costs, like mortgages and car payments. This gives you more flexibility with your post-retirement cash flow and protects your nest egg from unnecessary strain. 

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Requirements for early retirement

Below are a few financial and logistical requirements to consider before retiring:

• Minimum age requirements: There’s no official minimum early retirement age, but most aim to stop working in their 50s or early 60s. 
• Health insurance and income sources: Many retirement benefits — like Social Security and Medicare — don’t kick in until later. For example, you can’t claim Social Security until age 62, and Medicare eligibility starts at 65.
• Savings and financial independence goals: To retire early, you'll likely need to save aggressively during your working years. Many early retirees aim for 25 times their expected annual expenses in retirement savings. Diverse income sources — annuities, investment income, and part-time work — help ensure you retire with financial stability.
• Penalties and tax rules: Accessing retirement accounts before age 59½ generally comes with a 10% early withdrawal penalty. But exceptions exist, such as the Rule of 55 for workplace retirement plans and Substantially Equal Periodic Payments for IRAs. Know your options and tax consequences before tapping any accounts early.

Secure your future with Gainbridge’s annuities

No matter when you retire, one of the biggest concerns is outliving your money. If you're looking for stable retirement income, Gainbridge’s digital-first annuities can help deliver peace of mind. We offer multiple products to secure your financial future and never charge hidden fees or commissions.

Build a retirement strategy that fits your timeline with Gainbridge.

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This article is intended for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. The GainbridgeⓇ digital platform provides informational and educational resources intended only for self-directed purposes.

Annuities issued by Gainbridge Life Insurance Company, Zionsville, Indiana.