4 Signs You’ll Go Broke If You Try To Retire Early
Written by
Cindy Lamothe
Edited by
Amen Oyiboke
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Everyone dreams of early retirement — that magical day when you stop being a slave to your nine-to-five and get to enjoy your well-earned freedom. But not so fast. Experts say not to get ahead of yourself.
“There’s a common belief that retiring early is the ultimate financial dream,” said Andrew Gosselin, personal finance expert and senior contributor at Coupon Mister. “In reality, it can lead to serious money troubles if certain warning signs are overlooked.”
He said debt stands out right away.
“It doesn’t just vanish the minute someone stops working. Those credit card bills and personal loan payments keep coming, which can put a heavy strain on any nest egg. It’s one thing to manage debt with a paycheck, but it’s a different story when there’s no steady income.”
Here are the signs you’ll go broke if you try to retire early.
Overestimating Retirement Savings
A key warning sign of potential financial trouble in early retirement, according to Shirley Mueller, finance expert and founder of VA Loans Texas, is relying on overly optimistic assumptions about your savings.
“If someone hasn’t factored in inflation, rising healthcare costs, or market fluctuations, their nest egg might not stretch as far as they believe,” said Mueller.
For example, she said many early retirees underestimate the impact of withdrawing funds over 30-plus years, especially if their investments experience a downturn early on.
“I always recommend stress-testing retirement plans with conservative estimates and considering scenarios like higher-than-expected expenses to ensure long-term sustainability.”
Lack of a Detailed Post-Retirement Budget
Another red flag, said Mueller, is entering early retirement without a clear, realistic budget for post-retirement spending.
“It’s common for early retirees to overlook expenses like hobbies, travel, or even unexpected home repairs, which are things that can quickly drain savings if not planned for.”
She explained that a detailed, flexible budget that aligns with anticipated income sources like investments or side gigs is critical.
“Without this, retirees risk overspending in their first few years, leaving them financially vulnerable later.”
Heavy Dependence on Social Security or Limited Income Sources
Lastly, retiring early without diversified income streams is a major indicator of financial instability.
“Social Security benefits, for instance, may be significantly reduced for early retirees, and tapping into retirement accounts before age 59½ can lead to penalties,” said Mueller.
“If someone is planning to rely solely on Social Security or a single income source, it’s likely they’ll run into trouble.”
She advised building multiple streams of income such as dividends, part-time work, or rental income, and delaying Social Security benefits as long as possible to maximize payouts.
You’re Not Emotionally Prepared
On top of everything, Gosselin said there’s the emotional side.
“Retiring early often means losing the sense of purpose or structure work provides. That void can lead to boredom, which sometimes pushes people to spend more than they should just to stay occupied.”
He explained that isolation can make it worse if most friends or former coworkers are still in the workforce.
“It’s all too easy for social outings or spontaneous trips to become routine, draining funds that need to last a lifetime.”
He said recognizing these risks is the best way to steer clear of going broke after leaving the workforce.
“Early retirement looks different for everyone, but understanding these signs and doing the hard math can help keep future years comfortable and financially secure.”
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