The 3 Biggest Challenges for Early Retirees

Early retirement is a dream for many workers as they look forward to reclaiming more of their free time without facing the worries that having a career can cause. However, those who retire early face some major challenges that those who work until a more typical retirement age don't have to deal with as much. Three obstacles to early retirement are particularly difficult to overcome, and you'll want to make sure you're able to handle these tough issues before you decide to give up your career and retire at an early age.

1. Finding and keeping health insurance coverage

Most people rely on their employers to get insurance coverage for their healthcare expenses, and with the exception of a small number of workers who can get retiree health benefits from their former employers, retiring early means having to find a new way to protect against high healthcare costs. The risks of going without coverage are even greater in one's 50s and early 60s than they are for the many young adults in their 20s who choose not to get individual coverage outside of work, as the older you get, the more likely you are to face problematic medical conditions that require extensive and costly treatment.

If you're married and have a spouse in the workplace, then getting family coverage through your spouse's employer is often the simplest move. Continuation coverage under COBRA is available to early retirees, but eligibility is only for a relatively short period of time, typically 18 to 30 months. Individual coverage under the Affordable Care Act is also an option to consider, but it can be costly, and eligibility for potential subsidies will depend on family size and total family income. Medicare doesn't kick in for most people until age 65, and for many, that's the main motivation for waiting until then to retire.

2. Maintaining a healthy social life

In the middle of a hectic situation at work, it's easy to envision early retirement as an idyllic experience filled with fun and excitement. The reality doesn't always work out that way. For those who've had most of their social life connected with their workplace, leaving work can mean growing out of touch with their support network, leading to loneliness and depression. Even those who have plenty of friends outside work are often disappointed when they realize that even if they have the free time to pursue new and interesting things, their friends are often still working and have all their other obligations and therefore can't tag along.

It's certainly not impossible to build a happy social life in early retirement. A lot depends on what your particular wishes are for your retired years. It's smart to prepare before retiring early by looking into social groups in the areas in which you're most interested and seeing how they work. That way, you'll have a better idea in advance what the experience of early retirement will be like and predict any difficulties while you can still do something to fix them.

3. Coordinating financial resources

Finally, dealing with money matters becomes a more complex task once you've retired. Even if you have ample financial resources, figuring out where to get the immediate income you need can present challenges. Social Security isn't available to most people until age 62, and even those fortunate enough to have workplace pensions have minimum ages before they can draw monthly checks. Even tapping 401(k) accounts and IRAs can be a challenge, because provisions limit the ability to take withdrawals before certain minimum ages without paying penalties.

The key to financial management in early retirement is to have a good mix of different types of accounts for your investment assets. For instance, taking advantage of substantially equally periodic payments from retirement accounts can help supplement whatever you have in regular taxable financial accounts without paying penalties. Looking at lump-sum pension options can open up new ways to manage your finances. Replacing a paycheck can be tough, but with the right foresight, you can figure out how to make things work.

You can still do it

Even though these obstacles can be difficult, they shouldn't stop you from retiring early. They should instead motivate you to find solutions to potential problems before it's too late to do anything about them. By addressing these challenges head-on, you'll be better prepared to enjoy your retirement -- no matter when you take it.

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