Age may be just a number, but that number matters when it comes to retiring.

The common definition of early retirement is any age before 65 — that’s when you may qualify for Medicare benefits.¹ Currently, men retire at an average age of 64, while for women the average retirement age is 62.²

Retiring before the traditional age of 65 can feel exciting and give you something to look forward to. Whether you want to travel, take up new hobbies, or simply start a new chapter in your life, consider having a retirement plan.

Even if you’re one of the lucky few who don’t want or plan to retire, understanding what’s possible is valuable as you enter the later stages of life.

Read more: Health insurance for early retirees

Early retirement challenges

While there is research to show that working longer may keep you healthier and happier, there’s also evidence for the opposing view.

The National Bureau of Economic Research found that “retirement improves both health and life satisfaction,” in part by factoring in the number of people who are forced to retire due to health issues.³

However, one challenge is ensuring that you have enough assets to provide an acceptable level of income throughout your remaining years, so you’re financially ready to live without a paycheck.

The average lifespan in the U.S. is just under 77 years. For someone who retires at 55, this means they need to save up at least 22 years’ worth of income, and even healthier individuals who live beyond the age of 77 may need to have an even larger nest egg.⁴

How Social Security affects early retirement

While you’ll become eligible for Social Security at age 62, you won’t qualify for your full monthly benefit amount until a few years later.⁵

If you claim your benefits by 62, you only get roughly 75% of the full amount, which is adjusted because you’ll be getting checks for a longer period of time.

Spousal benefits can also be decreased if you take your benefit early. Specifically, spousal benefits are reduced to 35% of your full retirement amount, compared to 50% if you wait until at least 66.

If you are healthy and likely to live a long time, you may consider delaying Social Security until age 70 to help you get the most value from the system you’ve paid into over your working years.

Impact of working in early retirement

When you begin receiving Social Security retirement benefits, you are considered retired for the purposes of the Social Security Administration. You can get Social Security retirement or survivors benefits and work at the same time. However, there is a limit to how much you can earn and still receive full benefits.

Recalculation of benefits

If you are under full retirement age for the entire year, the Social Security Administration will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2024, that limit is $22,320. In the year you reach full retirement age, the Social Security Administration will deduct $1 in benefits for every $3 you earn above a different limit, between January 1 and the date you reach full retirement age In 2024, this limit on your earnings is $59,520.⁶

Delaying benefits

Delaying receiving your social security benefits can be advantageous, even in early retirement. If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.

If you start receiving retirement benefits at age 70, you'll receive the maximum 132% of the monthly benefit because you delayed getting benefits for 48 months.

If you can pay for your retirement expenses from savings for at least a couple of years, then it may be worth considering putting off filing for your benefit to lock in a higher monthly payment for life, even if you wish to officially retire from the workforce much earlier.

Health insurance options for early retirees

Medicare benefits start on the first day of the month in which you turn 65.

If you retire before this age, you will need to consider alternative health insurance options. You could explore if your former insurance plan will keep you grouped with the actively employed population as a retiree, though this is generally a rare benefit. Alternatively, you can explore COBRA, Health-Share programs, or joining your spouse’s plan if they are still working.

Weigh your health insurance options to see which works best for you until your Medicare coverage begins.

Pros and cons of retiring early

Deciding when to retire is a personal decision influenced by financial stability, health considerations, and individual preferences. There are both pros and cons to retiring early, but ultimately, you’ll have to decide when this significant milestone is right for you.

Advantages of retiring early

• More freedom to pursue hobbies and activities: Early retirees can enjoy extended periods of leisure to do the things they love.
• Make the most of healthier years: Some people choose to retire early while they are still fit and healthy, enabling them to travel and spend time with family.

Potential challenges

• Risk of outliving income: Retiring before 65 may require careful financial planning to ensure sufficient savings for an extended retirement period.
• Reduced social security benefits: If you retire early and take your Social Security benefits straight away, you’ll receive a lower amount in benefits. If you were born in 1960 or later, for example, and you start taking benefits at age 62, the earliest age at which you're eligible, your monthly benefits will be 30% less than if you wait until age 67.
• Need to find health insurance: Unless your ex-employer provides it, you'll have to pay for health insurance until you're eligible for Medicare at age 65, and insurance premiums can be double or triple what you're used to paying on your workplace plan.

Read more: Guide for deciding when to retire

Leveraging savings for early retirement

If you have sufficient savings, retiring early may be more achievable than you think. Why? Many people assume their retirement money is off limits until they reach age 59½. But a special rule in most 401(k) plans allows penalty-free withdrawals from age 55 – 59½ — but only if you leave your job after your 55th birthday.

If you still have money in your 401(k) plan from a former employer, and assuming you weren’t at least age 55 when you left that employer, you’ll have to wait until age 59½ to start taking withdrawals without penalty.

Additionally, if you have old 401(k)s rolled into your current 401(k) before you retire from your current job, you will have access to these funds penalty-free if you leave your current job after your 55th birthday.

As you save for retirement, consider diversifying your savings. Most people focus on filling up their 401(k) bucket but remember you may want to consider taxable or Roth (when possible) savings. Putting money in different account types (pretax, taxable, post-tax) may help you retire before age 59½. It will also offer flexibility and possible tax savings if you can be strategic about the account types you withdraw from in retirement. Consider all your options and their features and fees before moving money between accounts.

Read more: When can I retire?

The bottom line

Many people can’t wait for the day when they finally call it quits on their careers. Still, constantly worrying about finances isn’t exactly the way to spend your later years. To help get yourself on track, you can project your retirement readiness with Empower's Retirement Planner.