Personal Finance

3 Dangers of Early Retirement You Can’t Afford to Ignore

Maurie Backman

Published: February 16, 2025 12:33 pm

I have a friend who’s in his early 50s and is ready to retire ASAP after many years in a stressful industry. And from a financial standpoint, he can probably pull it off if he’s careful.

He owns his home outright and he doesn’t have kids to worry about. And while I couldn’t tell you exactly how much money is sitting in his 401(k), I’m going to assume that it’s a few million.

A big part of me wants to tell my friend to go for it. But I also worry about him retiring early. And if you’re contemplating a similar move, it’s important to keep these potential dangers of early retirement in mind.

1. Running out of money

The longer your retirement savings have to last, the more you risk running out at some point in time. Of course, you can mitigate that risk by having more savings when you retire early, and also, managing your nest egg withdrawals wisely. But the risk still exists.

If you’re going to retire early, one thing you shouldn’t do is follow the 4% rule. That guideline is designed to help your savings last for 30 years. But if you’re retiring in your early 50s like my friend, you might need your nest egg to last 35 or 40 — or possible even longer.

2. Having healthcare costs upend your budget

Medicare eligibility generally begins at age 65. If you’re going to retire much sooner than that, you’ll have many years where you have to bear the cost of health insurance. And that’s not an easy thing when you’re trying to stretch your nest egg.

What I told my friend to do — and I’d say this to anyone in a similar boat — is sit down with a financial advisor and make sure the numbers work. My friend is pretty confident he can afford the cost of health insurance for a decade or more. But he also admits that he hasn’t specifically priced out insurance options based on his age and location. So that worries me a little bit.

3. Ending up lonely

My friend who’s contemplating early retirement has a number of hobbies. He enjoys home improvement projects, he runs long distances, and he’s an avid reader. So I’m sure he can reasonably fill his days with different activities if he decides to stop working.

But this friend of mine is also a very social person. And since he’s single, he relies on the people he sees outside his home for company.

My concern is that if he stops working, he’s going to find himself devoid of company. Because he’s so young, most of his friends and peers are still working, and plan to keep doing so for a good number of years. And I’m not sure he’ll enjoy all of that solo time as much as he thinks he will.

If you’re in a similar situation, this is one area where a financial advisor can’t necessarily help. A financial professional can help you devise a safe savings withdrawal strategy, set you up with smart investments, and help you understand the costs that come with an early retirement. But they can’t necessarily prepare you for the mental and emotional aspect.

Only you can decide whether loneliness will end up being a problematic factor in the course of retiring early. So be honest with yourself.

One thing my friend says is that if he’s really lonely, he’ll try volunteering or consider a part-time job that involves working with other people. You may want to be open to a similar arrangement if you’ll be the only person in your social network who’s ending their career.