7 Signs You’re Ready to Retire Early

Many people consider retiring early, but it's crucial to assess your readiness for the changes in lifestyle and finances that come with leaving the working. According to recent data, over half of Generation X's early retirees are thinking about "unretiring," with 54% stating they might go back to work for emotional or financial reasons, such as missing the cerebral stimulation of a job or desiring more financial flexibility.

Think about whether you have reached important financial and personal milestones that enable a successful early retirement before leaving your job.

1. You Have No Debt

A fixed income may be severely strained if debt is carried into retirement. Professionals in finance typically advise paying off high-interest revolving debt before moving on to fixed-interest and unsecured loans. You might be in a better position to retire early if you have paid off all of your current debt.

2. You Earn Money from Several Sources

Because withdrawing from a 401(k) or IRA before age 59½ may result in a 10% IRS early-withdrawal penalty unless an exception applies, retiring early frequently implies you will rely on sources of income other than your retirement savings. Furthermore, Social Security benefits cannot start before age 62.

A long retirement can be supported and your dependency on early withdrawals can be decreased by having a variety of income sources, such as dividend income, real estate income, or freelancing.

3. Your retirement savings are substantial.

Strong tax-advantaged account savings can increase the likelihood of an early retirement. You could make the following contributions for 2025:

$7,000 to an IRA

$23,500 for a 401(k)

+ $1,000 IRA If you're 50 years of age or older, catch up

+ $7,500 401(k) If you're 50 years of age or older, catch up

+ up to $11,250 in an improved 401(k) catch-up for people between the ages of 60 and 63, according to the most recent IRS regulations

Making sure these savings are in place before you leave the employment may help ease future strain on your retirement cash flow if you have children and intend to assist with college fees.

4. You Have a Health Care Plan and Savings

Medicare eligibility typically begins at age 65, however some people may be eligible younger if they have ALS, ESRD, or a qualifying impairment.

One of the biggest costs of early retirement may be healthcare. A 65-year-old who retires in 2025 might spend roughly $172,500 on healthcare, according to a 2025 Fidelity research. Paying for extra years of insurance premiums and out-of-pocket expenses is typically required when retiring before the age of 65.

According to IRS regulations, money used for eligible medical expenses in retirement is tax-free if you have made contributions to a Health Savings Account (HSA). If not, you will need to save enough money to pay for medical bills and insurance payments. A spouse's job plan, COBRA (temporary coverage), or a Marketplace plan are examples of possible coverage alternatives.

5. Your Social Network Is Robust

The natural social connection that comes with working can be diminished by retirement. The U.S. Surgeon General's research emphasizes the significance of deep social connections for general wellbeing. You might be more equipped to handle the emotional shift into retirement if you already have a network of friends, are active in the community, or participate in group activities.

6. You Understand How to Establish Daily Routines

The transition from a set workday to an open schedule is difficult for many early retirees. You can stay involved and have a feeling of purpose if you know how to organize your days through hobbies, fitness, volunteer work, travel, or part-time employment. Because part-time employment offers structure and fits with personal interests, several retirees choose it.

7. You Feel Purposeful

Over forty percent of early retirees who are thinking about going back to work say they miss the daily challenge and stimulation that comes with working. Consider fulfilling pursuits before taking an early retirement, such as volunteering, picking up a new skill, spending time with grandchildren, or pursuing long-suppressed passions.

The Final Score

Although it can be enjoyable, early retirement demands careful financial planning as well as knowledge of how you'll use your time, keep up social ties, and handle healthcare before Medicare kicks in. You may assess if you're genuinely prepared by making sure you have several sources of income, substantial savings, and a well-defined living plan.

How The Retirement Group Can Assist

The Retirement Group can help you plan for healthcare and Social Security timing, analyze retirement income plans, and review your pension alternatives if you're thinking about retiring early.
For situation-specific advice, call us at (800) 900-5867.