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Top 5 Reasons Not to Retire Early

Author Greg Davis

Let’s admit it. At various points in each of our careers, we all dream of retiring early from the rat race and enjoying a relaxing retirement on a quiet secluded beach somewhere! I know I have.

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In fact, I started the retirement dreaming process when I turned age 50 as that is when higher levels of stress had permeated both my wife’s medical and my business executive careers. But before we start sipping on pina coladas by the beach, we need to be cognizant of the various opportunity costs of retiring early.

In this post, we will discuss the top 5 reasons not to retire early.


1. Paying for Healthcare Costs

You can’t enroll in a Medicare plan until you qualify at age 65 unless you have a disabling medical condition. If you retire at age 55, that leaves a 10-year gap during when you cover your own medical bills, typically without the protection of an employer-sponsored health plan. I was lucky in that I was able to negotiate my early retirement package to include low-cost health insurance at the same rate as active employees. Otherwise, self-insurance is prohibitively expensive.

One solution is to put money aside in a Health Savings Account (HSA) and allow the funds to roll over, year after year, until you retire. As discussed in a prior article, contributions to an HAS are tax deductible if you spend the money on qualified medical expenses, such as payments to doctors and other practitioners, prescriptions and insulin, x-rays and lab tests, eyeglasses, and hospital care.

Any unused funds could continue growing indefinitely, particularly when invested wisely. My wife and I have our HSA invested in low-risk and low-fee stock funds.

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2. Leaving Social Security Money on the Table

As we have discussed in detail in a prior article, you worked hard for your Social Security benefits and need to maximize them. If you want the full benefit you are owed based on your work history, you must wait until your full retirement age (FRA) to sign up.

But the earlier you retire, a smaller monthly amount for the remainder of your life than waiting until your FRA at age 67 or even age 70 when you maximize your monthly benefit. If you retire prior to age 67, you could lose as much as 30% of your benefits (or more if you are drawing as a spouse).

My advice is to set up your own online Social Security Account at the following website: www.ssa.gov/myaccount. This allows you to review estimates of YOUR monthly benefit under various assumptions, which is great for retirement planning.


3. Incurring Early Withdrawal Penalties

Using tax-advantaged accounts to save for retirement can be a smart move but tapping into those funds early can cost you some penalties. A 401(k) plan typically carries a 10% penalty for early withdrawals before the age of 59 ½. However, if you leave your company at age 55 or older, the IRS will allow you to make withdrawals penalty-free.

Those with traditional IRAs face a 10% withdrawal tax on distributions taken before the age of 59 ½ unless they agree to adjusted periodic payments based upon life expectancy. Similar 10% early withdrawal penalties may apply to funds converted into a Roth IRA depending on the composition of the account.

My wife and I have been fortunate to not have to tap into any tax-advantaged accounts (such as our IRA or 401 (k) plan accounts) yet. As you can see, this early withdrawal issue has many confusing rules. My advice is to speak with a trusted financial advisor who knows the costs associated with accessing your own money and how they affect your early retirement budget.


4. Not Being Prepared to Fund a 30+ Year Retirement

A woman who retires at 55 will need to make her savings last for 28.6 years, on average, compared to 20.4 years if she retires at 65. A man who retires at 55 will have to stretch his savings for 25.1 years, rather than 17.8. And for couples who make it to 65, there’s a 25 percent change that the surviving spouse lives to 98, according to the Society of Actuaries.

“With improved health care, many people are living longer than the national averages,” says Angela Dorsey, a certified financial planner in Torrance, California. Thanks to medical science, people are living longer than they ever have before and are active for much longer periods. AARP CEO Jo Ann Jenkins shared, “Our ability to live longer, healthier, more productive lives is one of humankind’s greatest accomplishments. Most sixty-five-year-old folks today will live into their nineties”.

While that sounds like great news, the bigger question is, are we prepared for an extended life? The article ponders, “What can we do not only to help people afford their longer lives but to help them thrive as they age?” We need to rethink our attitudes around aging and retirement. Thus, we need to be financially prepared to fund a long retirement period.


5. Not Mentally Prepared to Enjoy a Retirement

When you retire, you have a 40-hour gap in your week that you need to fill. “Are you sure you have enough activities to keep your body, mind and spirituality occupied for the many years you have ahead of you?” asks Catherine Valega, a certified financial planner in Winchester, Massachusetts.

I appreciate spending more time with Abby and discovering new offerings in the large city of Philadelphia. We love walking to many city sites, such as the excellent restaurant scene, sporting events on Broad Street, and concerts at the beautiful Kimmel Center. We also have been able to enjoy the outdoors by bicycling as well as picking up on our new retirement sport of pickleball, which is a racket or paddle sport that combines elements of tennis, badminton, and table tennis.

Retirement is going well for me as I accepted a board of director position on the Hershey Employee Support Fund (ESF). This fund provides immediate short-term financial assistance to eligible team members experiencing financial hardship. While I love being part of this ESF committee that has helped numerous employees since its 2003 inception, it also allows me the opportunity to reconnect with several of my favorite coworkers from my twenty-three years at Hershey.

My wife assists with local social service agencies in Philadelphia, like Broad Street Ministries, and is now fully involved with a special rowing club (Hope Afloat USA), which is a “rowing program developed specifically for breast cancer survivors helping each other reclaim healthy, joyful lives through the ancient sport of dragon boat racing.”

This is critical to the cancer recovery process as this program encourages them to be active to boost energy levels that may have dropped during treatment through a healthy and exhilarating sport. As a bonus, the rowing and coordinated weight-lifting exercise program are excellent for maintaining her fitness levels.

How much time do you realistically see yourself spending going on long walks, lounging poolside or curling up on the couch with an enjoyable book, especially after the novelty wears off? It is imperative to think through what activities will fill your day in advance of retirement.

Bonus: Sacrifice the Power of Compounding

Time is your friend when you are in retirement savings mode. For example, if you sock away $250 a month — $3,000 a year — from age 25 to age 55, you’ll have about $237,000 when you retire, assuming you make no withdrawals and earn an average 6 percent annually on your investments. Not a bad return on your $90,000 in contributions.

But let’s say you work 10 more years and retire at 65. In that scenario, you’ll have about $464,000, which is nearly double. Why? The extra decade’s worth of contributions helps, but that only adds up to $30,000. The real growth comes from another 10 years’ worth of interest earned not only on all the principal you contributed but also the interest earned on the interest that has compounded for four decades.

I learned one of the most powerful personal finance lessons early in my career, compound interest. From the start of my career at Hershey, I contributed to the company 401(k) plan and took a minimum of 6 percent from my paycheck to maximize the Company match, which was 50 percent of my contribution, or an additional 3 percent. My 401(k) balance and wealth grew over the years because of this compounding impact. That, my friends, is the power of compound interest.



In summary, there are lots of benefits to enjoy if you can retire early. But as we just discussed, it’s important to fully understand the various opportunity costs related to the idea of early retirement or as we prefer to dream…. sipping pina coladas by the beach in your fifties. ENJOY your retirement as I know I am!


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17 thoughts on “Top 5 Reasons Not to Retire Early”

  1. Greg, you suggest that readers consider a Health Savings Account. I agree, but your discussion was about the cost of health insurance prior to age 65. Readers should be aware: you are not allowed to use HSA funds to purchase health insurance, specifically pay for the premiums. HSA can be used for co-pays, deductibles, supplemental policies (such as Medicare supplementals like Part D and ‘Medigap” plans. BUT not for premiums for the base insurance.

    You did NOT suggest that readers use an HSA for premiums, but it needs to be clearly stated — that is not allowed.

    As an aside — my group was asked a couple years ago if someone would like to go part time to make space for a new hire that wanted to do more inpatient than her predecessor. I do only inpatient in our academic teaching group, and volunteered to reduce my weeks “if the offer was acceptable”. It was. Shortly thereafter, another colleague went out on maternity leave, and I ended up working extra weeks. Leaving me with an 8 week “vacation” at the end of her maternity leave. —- I now know I am NOT ready for retirement! Bored after a few weeks, feeling like I was not productive etc….. Missed the residents and students and patients.

    • Thanks David for the clarification on the allowable usage of HSA funds.
      The 8 week “test” was helpful in that you realized you weren’t ready for retirement..yet!?
      Happy New Year!

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  3. The retirement issue is very interesting. I thought to retire at 55, then at 60 etc. I retired at 78. I really liked Orthopedic Surgery, had a good private practice, but in 2015, I closed it and went to work for the VAH. Excellent choice: No more headaches of running a PP. In 2018 at 76, I stopped doing surgeries and then I did an injection pain clinic. I enjoyed what I was doing and, I was being paid for it. Started getting SS at 72. Now I play Pickle Ball 3 times a week instead of tennis, I have founded a Charitable Foundation to help pay PCP medical tuition ($220,000 over 4 years) that keeps me busy, I am writing a book about interesting surgical cases, so I am busy and happy. I still miss the interaction with my patients.

    • Congratulations Sergio on your later retirement as the FIRE concept is not for everyone. Like you, my age (& sore knees) forced me to switch from tennis to pickle ball and I truly hope you gain the same level of satisfaction as I have from writing a book. Lastly, I commend you for starting a Charitable Foundation as the tuition program is helping future PCP’s!

      P.S. Sidenote to readers: there’s no reason to postpone taking SS after age 70 as that’s the age where you earn your maximum SS benefit.

  4. No, actually I realized it was technically incorrect when I typed it, but I often substitute more conversational word choices into my comments. Not unlike using slang words in casual conversations. I’m sorry if you found it offensive.

  5. Love the FI part of FIRE, but one thing that the Covid lockdown taught me is that I am happier when I am working. I can’t see myself completely out of a job. Love the flexibility and freedom that FU money gives you, but like MMM said in one of his talks, a job is a lot more fun when you don’t need it.

    • Thanks WJC as I agree that working part-time can be rewarding in retirement.
      “The best way to enjoy your job is to imagine yourself without one.” – Oscar Wilde

  6. I reached 35 annual periods of contributing the max amount to Social Security by age 57. After that point no future earnings were of any benefit regarding my ultimate Social Security benefits. I suspect that’s true for most high earners with only a four year degree. I can see for physicians that would not be the case, but it is for most engineers. I did retire at the age of 60 and did not feel that the $16 to $18 K of health insurance premiums to cover my wife and myself were prohibitive, that’s relatively small money considering the upside of having good health insurance. Those two would be concerns for median earners or people, like my son, who had 12 low income years before he finished his residency. But retiring early isn’t that rare or difficult for Bachelor degreed high earners.

    • I am 56 and planning on retiring by next summer after I turn 57. The healthcare issue has been my biggest worry, as I have great insurance thru work but have several pre existing conditions.

      May I ask
      1. what plan level this $16-18k (I assume is annual cost) is i.e, bronze, silver, gold or platinum
      2. which state you are in
      3. if either of you also have medical issues.
      4. which insurance company did you sign up with


      • Consider a medical sharing plan like Christian Healthcare Ministries or Medishare in lieu of traditional insurance or combine it with a high deductible plan if you need to wait a couple of years for a medical sharing plan to cover pre-existing conditions. CHM costs around $270/mo per person (a little over $6K/yr for a couple).
        My wife and I have been on CHM for 4 yrs now, since retiring at age 55 and dropping my Cobra insurance (which was around $16-17K/yr) about a year later. So, we’ve saved $50K in premiums over that span, with minimal medical expenditures since then other than paying our doctors cash when being seen.
        It’s not for everyone, but it can sure be an awesome choice for many.

        • Thanks Richard for sharing your use of a medical sharing plan as it clearly has resulted in significant savings for you and your wife. Happy Holidays as I wish you a happy retirement & continued good health!

    • I think you mean to say “my wife and me.”

      “Myself “is reflexive and is almost never correct. Unless you’re saying something like I’d like “I’ll do it myself.

      The easiest way to test whether you should say, I, me, or myself, is to remove the reference to the other person, and see how it sounds. In this case, you would never say, “insurance premiums to cover myself were prohibitive.” Instead, obviously, you would say “insurance premiums to cover *me* were prohibitive.”

      For someone who is so self-satisfied, and earned so much money, you should learn to use English properly. Maybe you could take that up in your retirement! ☺️

      • Thanks Jim for the correction as I love your easy way to test for proper words. While I never said I earned a lot of money, I am very happy with life. For example, I paid thousands of dollars to a publisher so their team of editors could correct my poor writing style. Thanks to your input, my use of reflexive pronouns will improve for a lot less. Happy Holidays!

      • Let’s look at this again removing extraneous components of the sentence:

        I…did not feel that the $16 to $18 K of health insurance premiums to cover… “myself” were prohibitive,

        Sorry to rain on your parade, Jim, but since it appears that the speaker is implying that they, the first person, are doing the action of covering, “myself” is an acceptable pronoun.

    • Congratulations Steveark on your high level of earnings consistently throughout your career. Engineering clearly pays better than some medical & most accounting positions. I know of only a small group of folks who maxed out their Social Security for the entire 35 years upon which it is measured. With proper savings habits and consistent investing practices, I agree that an early retirement is possible for many high earning folks. Enjoy your retirement!

      If possible, please address SK’s questions & comments below. Thanks!


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