Key takeaways

• Claiming Social Security at age 62 pays about 70%-75% of full benefits, while delaying to 70 increases payments
• Early retirees must plan for healthcare coverage and longer retirement timelines
• Diversifying savings across account types could help bridge income gaps before age 59½

Early retirement can offer more freedom and flexibility, but it also comes with trade-offs. Strategic timing of benefits, careful planning for healthcare costs, and diversified savings can help make early retirement more sustainable.

The “magic number” in retirement may refer to how much people expect to have saved, though age is another number that matters greatly 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 Men currently retire at an average age of 65, while women typically retire around 63.

Retiring before the traditional age of 65 can feel exciting and give you something to look forward to. Empower research found that 49% of Americans think living a little by enjoying a high quality of life is important to have a happy retirement.

On the road toward retirement, those considering an earlier time frame should account for how several money matters will be affected.

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 your full retirement age (between 66 and 67, depending on birth year).²

If you claim your benefits by 62, you only get roughly 70%–⁠75% of the full amount, depending on your birth year, 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 about 32.5% of your full retirement amount, depending on birth year and when benefits are claimed, compared to 50% if you wait until your full retirement age.

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.

Read more: Is Social Security income taxable?

Impact of working in early retirement

When you begin receiving Social Security retirement benefits, you are considered retired according to the Social Security Administration. You can receive Social Security retirement or survivor 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 withhold $1 from your benefit payments for every $2 you earn above the annual limit. For 2026, that limit is $24,480.³ In the year you reach full retirement age, the Social Security Administration will withhold $1 in benefits for every $3 you earn above a different limit, between January 1 and the date you reach full retirement age. In 2026, this limit on your earnings is $65,160.

Delaying benefits

Delaying receiving your Social Security benefits could be wise for your financial future, even in early retirement. If you start receiving benefits at your full retirement age (which varies by birth year), you get 100% 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 could receive the maximum 132% of the monthly benefit because you delayed getting benefits for 48 months.

Read more: To collect or not to collect: Does waiting for a bigger Social Security benefit pay off?

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 based on the type of coverage and when you enroll. Premium-free Part A generally starts the month you turn 65 (or the month before if your birthday is on the first), while Part B start dates depend on when you sign up.

If you retire before this age, you will need to consider alternative health insurance options. You could explore if a 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 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. Balancing time and costs is essential for those investing in retirement experiences.
• 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. It’s estimated that some American couples could need up to around $413,000 to cover health care costs in retirement.

Potential challenges

• Risk of outliving income: Retiring before 65 may require careful financial planning to ensure sufficient savings for an extended retirement period. The average lifespan in the U.S. is just over 78 years. For someone who retires at 55, this means they need to save up at least 23 years’ worth of income, and even healthier individuals who live beyond the age of 78 may need to have an even larger nest egg.⁴
• 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 generally 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 the additional 10% tax, unless another IRS exception applies.

Additionally, if you have old 401(k)s rolled into your current 401(k) before you retire from your current job, you may have access to these funds without the additional 10% tax 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, including taxes, fees and expenses, before moving money between accounts. Assess all benefits of current accounts before moving money.

Read more: When can I retire?

Retiring now or later

Many people can’t wait for the day when they finally enter retirement. Having a solid understanding of how retirement accounts and income work can help provide peace of mind. You can also project your retirement readiness and test out different scenarios using Empower's free Retirement Planner.