Early Retirement Challenges to Be Prepared for

30-05-2018 | dojo |

Early Retirement Challenges to Be Prepared for

Early retirement is a dream for many. While saving enough to accomplish this goal is challenging, it’s just the beginning. Here are five challenges you must include in your early retirement planning.

We all know that, in order to retire early, we need to get of of debt, run a successful small business (or at least have a lot of money saved), invest wisely and become financially independent.

These are not easy to accomplish, but not impossible either.

One you take care of all these, you are ready for early retirement.

Yet, there are some challenges that come with it

Health Insurance

You are eligible for Medicare only after you turn 65. But most early retirees are doing this in their 50s or even 40s. So no Medicare for you.

No employer sponsored health insurance plans either, since you are now retired. This means you’ll need a private health insurance, which will be costly.

Health insurance companies won’t charge higher premium for pre-existing medical conditions (under the Affordable Care Act), but charge higher premiums based on age and will increase yearly.

You can’t freely access your retirement savings until 59 and a half.

If you do so, you’ll be subject to income taxation and also a 10% early withdrawal penalty. Make sure you don’t need to touch this money, until you are of age, otherwise you’ll lose a lot during the process.

This can be circumvented by having a Roth IRA, that allows you to withdraw your contributions at any time, without paying an income tax or the 10% early withdrawal penalty.

Roth IRA limits your yearly contributions to $5.500 or $6500, if you are 50 or older, so there’s not enogh money for your early retirement funding.

There’s an additional solution, to solve even this problem, you can set up a Roth IRA conversion ladder.

You can convert from other retirement accounts the annual amount you find necessary for each year of your early retirement.

Do expect to pay the 10% early retirement fee on these conversions though, since you’ll withdraw money from other retirement accounts and fund your Roth IRA.

You can get distributions from your Roth IRA on an yearly basis, until you reach 59 and a half and are eligible for your other retirement funds.

Living more than you have retirement funds for

Outliving your money can be a serious issue for early retirees, since, if you do succeed in retiring sooner, there are more years to fund with your retirement money.

A smart strategy is to withdraw little of your funds each year, so that you don’t deplete your retirement accounts and also keep on investing.

This doesn’t require too much time and can work in your favor.

You could also find new ways to earn money (a small side business that doesn’t take too much of your time). In this case you can cover at least some of the expenses and not get bored as well.

Downsizing is an excellent way to get some money each month. You either sell your current property (if big enough to be a hassle) and buy something smaller. If done right, this should give you quite the boost.

Or you can rent it and go live in a smaller apartment/house. The rent you pay should pay itself from the rent you are charging your tenants and you should also get some extra money each month.

We have a small village house,with a lot of land to cultivate. And 2 city apartments that should earn us enough money each month to never even consider touching our savings or retirement funds.


My country (Romania) has gone through some pretty ugly inflation 30 years ago. And I mean ugly.

Within weeks our savings turned useless, money that was saved for a car or a house could barely buy you a pair of jeans.

If the inflation is under control, about 3% per year, keep your yearly withdrawal rate low and you should be safe. It’s also good to still look for extra-money opportunities or invest in gold bullion.

A stock market crash

They happened before and are bound to happen at least once during your retirement.

The good thing is that market crashes usually play out in few years and then you’ll see your investments grow again.

Keep your portfolio diverse and never act on panic. This way you can afford to wait out the bad times and not sell your portfolio at low prices.


We talked about all financial challenges an early retiree has to face, but didn’t address one of the biggest challenges: boredom.

Years ago, people retired at 50 in my country. Then 55. Enough of life left and for some quite boring. While some just watch TV and wait for their days to end, I’ve also known countless retirees who just cannot waste their time like this.

Most of them are working part-time at various small companies, others are caring for elder people or work as nannies for younger families.

If you are never content with just letting the days pass, there are enough opportunities for you as well. Semi-retirement in this case makes a lot of sense and it also allows you to stay connected with the ‘real world’.

Are the any early retirement challenges I left out?

Leave a Reply

Your email address will not be published. Required fields are marked *

©2018 Early Retirement Blog – Personal Finance Advice. All Rights Reserved.