What It Really Takes to Retire Early—and Stay Retired
Early retirement sounds like a dream. You quit your job in your 40s or 50s, travel more, and have more control over your time. But making that happen—and keeping it going—is harder than most people think.
The problem? Leaving the workforce early means more years without a paycheck. At the same time, your costs don’t stop. In fact, expenses like healthcare, housing, and inflation can make early retirement more expensive than expected. It’s not enough to just save a lot—you need to plan every part of your financial life around staying retired, not just reaching it. If you want to make early retirement work, here’s what you need to know from the start.
1. Set a Realistic Financial Target
One of the biggest mistakes early retirees make is underestimating how much they’ll need. Many follow the basic “25x” rule, which says you need 25 times your yearly expenses saved. But this rule doesn’t always work when you’re retiring early.
Why? Because retiring at 50 means your money has to last 30 or even 40 years. That’s longer than what traditional retirement plans account for. And you might not get access to Social Security or pension benefits right away. So you need to plan for more than just your monthly bills. Include things like long-term healthcare, rising costs, and emergencies. A safer bet is to calculate what you’ll actually spend each year and then add a cushion for unexpected changes.
2. Work with a Retirement-Focused Advisor
Planning for early retirement takes more than just saving money. It involves tax planning, investment strategy, income management, and lifestyle choices. A professional can help tie all of these pieces together.
Working with a financial advisor who understands retirement can save you from costly errors. Firms like Bogart Wealth offer tailored planning services for people looking to retire with confidence. They help clients align their financial goals with long-term income needs—so retirement doesn’t just begin early; it stays secure.
3. Prepare for Healthcare Costs on Your Own
Many people don’t realize how much of their healthcare is covered by work benefits until they leave their jobs. If you retire before 65, you won’t have access to Medicare. That means you’ll need to buy your own insurance or use COBRA to extend your work coverage—both of which can be expensive.
Healthcare costs tend to rise as you get older. You’ll need to factor in premiums, deductibles, prescriptions, and potential emergencies. It’s also smart to look into health savings accounts (HSAs) before retiring, if you’re still eligible. These accounts let you save tax-free money for future medical expenses, which can help bridge the gap until Medicare kicks in.
4. Learn Your Spending Habits Now
It’s important to know how much you spend now so you can guess how much you’ll spend later. Many people assume they’ll spend less in retirement, but that’s not always true. Travel, hobbies, or even higher healthcare costs can make your expenses go up.
Track your spending for at least six months. Look for patterns. Are there areas where you’re spending more than expected? Which expenses will stay the same after retirement? Which will go away? Use this data to build a sample retirement budget. Then try living on that budget for a few months before you leave your job. It’s a good way to see if your plan will actually work.
5. Don’t Rely on One Source of Income
If you plan to retire early, you’ll need more than just a retirement account. Depending only on a 401(k) or IRA means you might run out of money too soon, especially if markets drop early in your retirement years.
It’s better to build more than one stream of income. This could include dividends from stocks, rental income, interest from savings, or even part-time consulting work. The more income sources you have, the less pressure you’ll put on your investments. It also gives you more flexibility in how you draw down your savings.
6. Know the Trade-Offs with Social Security
Social Security can’t be your only retirement income—especially if you stop working early. If you retire in your 40s or 50s, you may not qualify for full benefits, or you may get a much lower monthly amount.
That’s because your Social Security payout is based on your highest-earning 35 years. If you only work 25 years, those missing years get counted as zeros. This lowers your benefit amount. To reduce the impact, some people choose to work part-time later or delay filing for benefits. Either way, know how early retirement will change your future Social Security income.
7. Don’t Ignore Inflation Over Time
Prices don’t stay the same. Groceries, gas, housing, and healthcare all get more expensive. Inflation might not seem like a big deal over a year or two, but it adds up over decades. If your plan doesn’t account for this, you could run into trouble down the road.
If you retire at 50, your money needs to keep up with 30 or 40 years of rising costs. To do that, build in an annual increase in your spending projections. Even a modest 2% or 3% growth per year can make a big difference over time.
Also, choose investments that have a good chance of outpacing inflation. Stocks, real estate, and inflation-protected bonds are good options to consider.
8. Understand the Tax Side of Retirement
Many early retirees overlook taxes. They think their costs will drop, but that’s not always true. If most of your money is in a tax-deferred account like a 401(k), withdrawals are taxed as regular income. And if you take money out before age 59½, you could face penalties unless you follow specific rules.
It helps to mix your account types. This means having some money in Roth IRAs, brokerage accounts, or savings accounts. Each has different tax rules. A balanced approach gives you more control over how and when you pay taxes.
Also, consider how capital gains, dividends, and rental income will be taxed. The more you understand the rules, the easier it is to keep your tax bill low.
Retiring early sounds great, but it’s not easy. You need a clear plan, a strong savings base, and smart decisions every step of the way. You also need to be ready for changes in the market, taxes, and your personal life.
The goal isn’t just to retire early—it’s to stay retired without worry. With the right steps, tools, and guidance, you can make early retirement more than a dream. You can make it your real life.
