One of my favorite moments as an advisor is when a client looks across the table, wide-eyed, and says, “Wait…I can really retire now?”
Time after time, people assume they’ll be working into their late 60s, only to discover their savings, pensions, or equity compensation have already put them in a strong position.
That surprise comes from a common misconception: that retirement age is a fixed number. In reality, there’s no universal definition. Long ago, the government set benchmarks like “full retirement age” for Social Security or Medicare eligibility, but retirement itself is personal — it depends on your financial resources, your health, and how you want to spend your time.
Let’s take a closer look at what “early retirement” means in practice, how to cover the income and healthcare gaps it creates, and why deliberate, proactive planning can help you retire sooner.
What Exactly Is Early Retirement?
The average retirement age in the US is about 62. So, when most people hear “early retirement,” they picture someone leaving the workforce decades before their peers — perhaps someone who embraced the FIRE (financially independent retire early) movement and lives a life of austerity.
While this is true for a small fraction of the population, “early” is relative.
Retirement is a personal milestone, one that’s driven by your retirement savings, health, and lifestyle goals. Government benchmarks like full retirement age are just markers that have been in place for decades. Some people step away from full-time roles in their mid-to-late 50s, while others pivot to consulting or part-time work as a bridge.
The point is, early doesn’t have to mean extreme. It simply means sooner than the traditional 62–67 timeline most people expect — and with thoughtful planning, many people discover
they’re closer to that milestone than they realize.
Funding an Early Retirement
The question isn’t just can you retire early — it’s how you’ll pay for it. Stepping away from full-time work before a traditional retirement age has tradeoffs. One major one is bridging the gap between your retirement date and when benefits like Social Security and Medicare kick in.
A strategic withdrawal strategy comes into play. And that starts with the 4% rule and a guardrails approach.
The History and Reliability of the 4% Rule
The 4% rule was first introduced in the 1990s, based on research showing that if retirees withdrew 4% of their portfolio in the first year of retirement (and then adjusted that amount each year for inflation), they had a very, very high likelihood of their savings lasting for at least 30 years.
What’s most remarkable is that this rule held up across every 30-year period tested in US market history, even when retirees began during challenging times like the Great Depression or the stagflation of the 1970s. In other words, there has never been a historical 30-year stretch where a 4% withdrawal rate would have completely depleted someone’s portfolio.
That said, history isn’t futureproof. Markets don’t move in predictable cycles, the number of years in your retirement could be longer, and no formula can guarantee future success. The 4% rule should be viewed as a guideline — a useful starting point for planning — versus a guarantee.
Building a Sustainable Withdrawal Strategy With Guardrails
While the 4% rule gives a baseline, it doesn’t account for the intricacies of your life. Spending patterns change, markets rise and fall, and flexibility is important. The guardrails approach accounts for that need.
Think of guardrails like lane markers on a road: they keep you from drifting too far off course. With this strategy, you adjust your withdrawals based on how your portfolio is performing. If markets are strong and your balance grows, you can comfortably increase spending. If markets stumble, you tighten the proverbial belt temporarily to preserve your long-term outlook.
This dynamic method not only reduces the risk of outliving your money but also allows you to enjoy more in good years, rather than sticking to a rigid withdrawal rate.
How Social Security Factors into Your Retirement Timeline
For most retirees, Social Security benefits form a cornerstone of retirement income. But the timing of when you claim has a legitimate impact on your monthly checks, and it’s one of the biggest considerations if you’re thinking about retiring early.
Here’s how it works:
- Eligibility begins at age 62. This is the earliest you can claim, but your monthly benefit will be permanently reduced — by as much as 30% compared to waiting.
- Full retirement age falls between 66 and 67, depending on your year of birth. Claiming at this point gives you 100% of your benefit.
- Delaying to age 70 increases your retirement benefits by about 8% for each year you wait after your full retirement age, maxing out your monthly income.
For early retirees, the temptation to start at 62 can be strong. After all, why not take the money as soon as it’s available? But claiming early means locking in a smaller check for life. Over a 20- or 30-year retirement, that reduction adds up to a six-figure difference.
On the other hand, waiting isn’t always practical. If you’re retiring in your late 50s or early 60s, you’ll need a plan to bridge the gap until Social Security begins — either by drawing from retirement accounts, relying on taxable investments, or working part-time.
The decision comes down to your retirement savings, health, life expectancy, and income needs. That’s why Social Security is an integral part of your broader retirement plan.
Healthcare: The Overlooked Cost of Retiring Early
One of the biggest curveballs for early retirees is healthcare. While Medicare provides coverage starting at age 65, if you retire in your 50s or early 60s, you could face several years of out-of-pocket health insurance costs before you’re eligible.
Here are some of the most common ways early retirees bridge the gap:
COBRA coverage. You can extend your employer’s health insurance temporarily, but premiums are often steep since you’re paying the full cost.
Marketplace insurance. The Affordable Care Act exchanges offer private plans, but premiums vary widely depending on your income and state.
Employer retirement health benefits. Some large companies still offer retiree health coverage, though it’s becoming increasingly rare.
Private insurance or HSAs. For those with higher retirement savings, using a Health Savings Account or private plans may fill the gap.
Even in Minnesota, where health costs tend to be more moderate, early retirees still face significant premiums. Minnesota’s average Bronze-tier premium for a 30-year-old is $315 per month, which is actually among the lowest in the country.
The challenge is not only paying the premiums but also budgeting for rising healthcare costs over a retirement that may last 30 years or more. An individual retiring at 65 will need about $165,000 just to cover medical expenses in retirement. Retiring earlier could mean higher costs over a longer horizon.
Lifestyle and Personal Finances Impact Your Retirement
If you’re like many high-achieving executives, work is central to your identity — and has been for decades. Stepping away from the corner office or leadership role may seem freeing in theory, but it can also create surprisingly difficult questions:
What will I do with my time?
How will I find purpose?
From a financial standpoint, early retirement could impact how you live:
- Soft landings. Some retirees ease into retirement by moving from full-time to part-time work, consulting, or serving on boards. This can provide both income and structure.
- Travel goals. Many retirees dream of traveling more once they leave the workforce — whether it’s extended trips abroad, more frequent visits to see family, or seasonal escapes to warmer climates. If you retire early, be mindful of these costs, as they can put a strain on your retirement savings.
- Cost of living adjustments. Downsizing to a smaller home, relocating to a lower-cost area, or simply trimming discretionary spending (even briefly) can stretch your retirement fund further.
- Years of service benefits. For executives with pensions or defined retirement systems, longer tenure may unlock higher payouts. Retiring early might mean smaller checks, so it’s worth understanding exactly what you’re eligible for.
Outside of spreadsheets, early retirement requires a personal plan for how you’ll spend your days. Hobbies, travel, volunteering, and family time all help provide meaning and routine. Financial independence may open the door to retiring early, but it’s purpose that makes those years fulfilling.
Investment and Financial Planning Strategies for Early Retirees
If you retire early, it’s absolutely imperative to ensure your savings can support the life you want to live for decades to come. To do so, you’ll need to carefully coordinate your investment strategies, withdrawal approach, and tax planning.
So, what should you keep in mind?
Diversification. A balanced portfolio across equities, bonds, and alternative assets helps provide growth and stability. This helps create reliable income streams that allow you to enjoy the lifestyle you’ve envisioned, whether that’s travel, hobbies, or time with family.
Withdrawal sequencing. Knowing which accounts to draw from first can save significant money over time. For example, tapping taxable brokerage accounts early may allow tax-deferred accounts like IRAs and 401(k)s to keep compounding. Coordinating withdrawals across account types can smooth out taxable income and extend the life of your portfolio.
Tax-aware planning. Every withdrawal is also a tax decision. Strategies like Roth conversions, harvesting capital gains in low-income years, or coordinating withdrawals with Social Security timing can reduce your overall lifetime tax bill (i.e., the amount going to the IRS, instead of your checking account). This kind of planning often makes the difference between “just enough” and true flexibility in retirement.
Stress-testing your plan. Running your retirement income strategy against different market scenarios — both good and bad — helps protect you from the worst-case scenario: outliving your money. A sustainable plan should leave you confident that even if markets dip, your retirement lifestyle doesn’t have to.
This is where working with a financial advisor can help. They can test your assumptions, model “what-if” scenarios, and integrate wealth management strategies so your investments can help you attain your life goals.
FAQs About Retiring Early
What’s the earliest age I can retire?
Technically, you can leave the workforce at any age — but “retiring” in the traditional sense usually means having enough savings and income streams to support yourself without work. From a government benefits perspective, the earliest you can claim Social Security is age 62, though with reduced payments.
How do I cover health insurance if I retire before 65?
Because Medicare doesn’t start until 65, early retirees often rely on COBRA coverage, private plans, or ACA marketplace insurance. Premiums can be steep, so it’s important to budget for them in your retirement plan.
Can I access my retirement accounts before 59½ without penalties?
Generally, distributions from IRAs or 401(k)s before 59½ trigger a 10% early withdrawal penalty. However, there are exceptions:
- The “Rule of 55” allows penalty-free withdrawals from a 401(k) if you separate from your employer at age 55 or older.
- Substantially Equal Periodic Payments (SEPPs), sometimes called 72(t) distributions, also allow early access but come with strict rules.
How much should I save to retire early?
It depends on your lifestyle, cost of living, and expected retirement length. A general benchmark (“general” being the operative word) is the 4% rule: you’ll want a portfolio large enough that withdrawing 4% annually (adjusted for inflation) covers your expenses.
What if I want to work part-time after retiring early?
Many early retirees choose to consult, serve on boards, or take on part-time roles. This can help cover healthcare costs, reduce withdrawals from retirement accounts, and ease the emotional transition from full-time work.
Closer Than You Think
One of the biggest takeaways is that early retirement is often more attainable than people expect. But retiring sooner isn’t just about hitting a number on a spreadsheet. It’s about knowing your income plan is sustainable, your healthcare strategy is accounted for, and your lifestyle goals can be supported with confidence over the long term.
When those pieces come together, retiring earlier stops feeling theoretical and starts feeling possible.
If you’d like to explore what that could look like for you. Whether it’s withdrawal guardrails, Social Security timing, healthcare planning, or tax-aware investment strategies, the Pine Grove team can help. Reach out to start a personalized conversation about your retirement timeline and whether you may be closer to stepping away than you think.
