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The unexpected problems with early retirement

Amy Fontinelle

Posted on September 22, 2023

Amy Fontinelle is a personal finance writer focusing on budgeting, credit cards, mortgages, real estate, investing, and other topics.
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Note the rise of the FIRE movement — financial independence, retire early — and the social norms it jostles.

Point out the long-range forecasting challenges involved when planning an early retirement.

Warn about the danger of burning through retirement money too fast and needing other sources of income.

Retiring in your 30s or 40s may sound like a dream come true. And for many members of the financial independence, retire early (FIRE) movement, it’s already a reality, or a goal within reach.

One of the trickiest parts of achieving that goal is planning in the face of uncertainty. The uncomfortable truth is that all would-be retirees have to make projections about:

  • How many years they’ll need to live off their savings.
  • How their investments will perform.
  • What their annual expenses will be.

For people retiring two to four decades sooner than normal, those projections can be even harder to make.

Whether you’re interested in an extra-early retirement for yourself, or you just want a better understanding of how the FIRE folks are pulling it off, these are the particular challenges of making it work.

The social stigma of being a young retiree

Our society both looks up to and scorns those who are financially successful. We may admire people who are wealthy while also resenting them for achieving something we think is out of reach for ourselves. We might think that they didn’t earn their wealth through hard work, that they gained it through exploiting others or through an inheritance. (Related: Why millennials should not rely on an inheritance)

“I think that there is often an assumption that this person is ‘lazy’ and did not want to continue working and are not contributing to society in some way,” said Shang Saavedra, a personal finance educator and blogger at Save My Cents. “I don’t think that is always the case. In many aspects, people who reach early retirement want optionality — be it more flexibility to focus on family and relationships, or simply not having to shoulder the high pressures of staying in the rat race forever.”

Those who retire at a young age will need to decide how to describe their circumstances to others and whom they want to share information about their financial success with. Some are an open book about their achievements, using the internet and social media as platforms to educate and inspire others through websites, podcasts, and coaching.

Those who prefer to keep matters private will need to decide what to tell family and close friends, who are sure to notice if you stop working — especially if your early retirement plans involve traveling the world or another activity perceived as incompatible with earning a regular income. You may find yourself out of sync with others your age who aren’t in the FIRE movement.

“Every individual may have different obstacles, challenges, and some may even have it easier or harder, but if somebody can retire early — in their 30s, 40s, etc. – I would hope society would see that as an accomplishment, and hope they celebrate the individual rather than envy the success,” said Alejandro Mendieta, a managing partner of Coastal Wealth, a MassMutual firm and one of the largest financial services firms in Florida. “The decisions we make in school, in our careers, and the time we sacrifice will echo in our retirement.”

Paying for health care

While traditional-age retirees can rely on Medicare, young retirees are on their own when it comes to paying for health care — and you’re probably looking at paying more for health insurance and getting less coverage. Workplace health plans tend to offer more generous benefits and are heavily subsidized by employers. About half of Americans get their health insurance through their jobs, according to the Kaiser Family Foundation, an independent nonprofit focused on national health issues.

You may also be more susceptible to increasing health care costs when you’re shouldering more of the burden yourself. You’ll need a solid plan to afford health insurance premiums, your share of providers’ bills, and medication — for the rest of your life.

“There are several options for health care,” Saavedra said. “I have heard of some early retirees working part-time or just enough hours to get health insurance. If you plan to retire fully, you have options too. You can buy health care insurance on the market — keep in mind that the premiums increase as you age and are usually more than what you’d pay when you’re employed. You could join a health-sharing ministry, which are religious organizations that pool health care costs across their members. Finally, there is self-insurance as a last resort — and costs can often be lower if you choose to retire outside of the United States.” (Related: Retiring early? A guide for securing health insurance)

Forecasting errors and uncertainty

How much do you need to save for an early retirement? The FIRE community has a few rules of thumb that many people follow. Those who want the fat FIRE lifestyle, meaning a more luxurious retirement, might aim to save 40 to 50 times their anticipated annual retirement expenses. Those who are comfortable with lean FIRE, a more frugal retirement, might aim for 25 times their anticipated annual retirement expenses. One group plans to live off $75,000 or more per year, while the other plans for about half of that. (Retirement planning calculator)

“Retirement will always be filled with new challenges, twists and turns, and hurdles,” Mendieta said. “Investing in a good financial professional can provide the most potential certainty in the uncertainty of complex financial decision-making.”

All retirees have to manage risks, including:

  • Investment performance
  • Tax changes
  • Inflation
  • Disability
  • Longevity

Divorce can throw a serious wrench into any married couple’s retirement plans, as can providing for an aging parent. Younger retirees may face the unique risk of a surprise baby and the expenses of raising it. The key is to be aware that your initial projections are nothing more than your best educated guess and you’ll be readjusting them regularly.

“It is really important to revisit your forecasts and your numbers every year and also revisit your portfolio allocations,” Saavedra said. “Consider purchasing products such as disability income insurance, having investments in inflation-hedged products, or keeping a significant part of the portfolio in higher-risk, higher-return assets to balance against these forces. If you are disabled, there is Social Security available as well, as a source of income.” (Learn more: The ideal retirement withdrawal rate)

Room to recalibrate

A unique benefit of retiring super early is that if your plans go awry and you’re burning through your nest egg faster than expected, you may have an easier time returning to work. You won’t face the age bias that older workers sometimes face. (Related: Financial implications of unretirement)

However, you may face challenges similar to those of mothers who exit the workforce to raise children — challenges such as explaining a resume gap, updating your skills, and possibly doing something that’s less challenging and less remunerative than you’d like until you can prove yourself.

Starting a business is another possibility, and it’s one that many FIRE “retirees” pursue. They’re an example of the work optionality Saavedra mentioned earlier.

Needing sources of income besides retirement accounts

Tax-advantaged retirement accounts are another aspect of the American retirement system that’s not designed for people who want to retire young. While they can be a great way to accumulate wealth, you’ll need a strategy for drawing on other sources of savings before age 59½ to avoid early withdrawal penalties.

A financial professional can help you explore possibilities, such as earning income from qualified dividends and long-term capital gains to reduce your tax bill, withdrawing contributions (but not earnings) from a Roth IRA, or taking substantially equal periodic payments from a retirement account. (Learn more: Retiring early? Possible ways to tap savings but sidestep penalties)


Retiring decades earlier than the norm comes with unique challenges but also unique opportunities. Navigating certain social situations may be trickier, and you’ll need to find your own health care insurance. You’ll have a longer time horizon for plans to go awry, but also more time to make up for detours. With hard work, a willingness to be different, some good luck when it comes to your health and your career, and perhaps the guidance of a financial professional, you could become the next member of the FIRE movement.

Discover more from MassMutual...

Is paying for long-term care part of your retirement plan?

A checklist for early retirement

How to help parents in retirement while preserving your own plan

This article was originally published in August 2021. It has been updated.


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The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.