Early retirement is undeniably an appealing prospect for many people. There are those who dream of relaxing, spending more time with their kids/grandkids, engaging in a meaningful hobby, or doing more volunteer work. This notion is even more enticing for those who are not terribly fond of their work and wish to escape the “grind” of everyday life. While I definitely encourage people to find Purpose in their work and careers (see my article on finding Purpose in work), I know that is not everyone’s reality. Some people simply want to get out and start traveling cross-country in their RV or spend time relaxing on a beach!

There’s nothing wrong with an aspiration to retire early. I certainly understand the appeal. The problem, however, is that many people do not anticipate the numerous challenges associated with early retirement. These include the following six challenges:

Failing to Account for Inflation

You might have built up a nice nest egg that would get you by for a while in today’s dollars, but what about tomorrow’s dollars (so to speak)? What will a gallon of gasoline or a dozen eggs cost in ten years? What will your home’s heating and electric bills look like? While we can’t predict the future, we can be fairly certain that prices will continue to rise. Because of this, it is crucial to account for inflation when you’re planning for early retirement. Doing so will help ensure that your savings and investments will be sufficient to cover your expenses as the cost of living increases.

Underestimating Healthcare Expenses

Another challenge of early retirement is underestimating healthcare expenses. As we age, our healthcare needs tend to increase, which can result in higher medical costs. Additionally, if you retire before the age of 65, you cannot count on Medicare to cover your needs. Because of this, health insurance (along with prescriptions, doctor visits, or other healthcare-related needs) could account for a large percentage of your expenses.

Loss of Daily Routine and Identity

Retirement can be challenging at any age (see my article on why retirement can feel like grieving), but the loss of daily routine and personal identity may be felt more acutely when you retire early. When someone asks “What do you do?”, they are typically thinking about your career. How do you answer this question once you’ve retired? To combat the feelings of listlessness or loss of identity you might be feeling in early retirement, it’s important to create a new routine and find ways to define yourself to help combat the loss of daily structure and identity.

Forgetting the “Longevity Factor”

Because people are generally living longer than they have in the past, it is critical to account for those extra years when planning for retirement. This means that you’ll need to budget and save accordingly to ensure your funds will last throughout your retirement. As you plan for early retirement, keep in mind that you may need to support yourself financially for several decades.

Read my post on “Preparing Financially for a Longer Life” for more information on this topic.

Market Volatility

It is a simple fact that the stock market will experience highs and lows during your retirement. You can’t count on steady, predictable growth year to year, and that’s okay! I always caution my clients to not get jumpy when the market fluctuates. When you’re dealing with a long horizon for your investments, it is best to sit tight and simply let the market turmoil happen. If you have prepared properly, market volatility should not be an issue, even for early retirees. Talk with your financial advisor to create a plan that accounts for market fluctuations.

Emergencies and Expenses

Life is uncertain, and you can never know what is around the bend. A hailstorm might hit your house, you could experience a serious health issue, or you may choose to help your kid through a crisis. It is critically important to be prepared for unexpected expenses in early retirement. This means having an emergency fund in place to cover any unanticipated costs that arise. Without a steady income from work, it’s important to have a safety net to rely on in case of emergencies. Having readily available funds can help alleviate stress and ensure you handle any unexpected situations that come your way.

Although early retirement is appealing for many people, it can come with certain risks. Without a steady income from work, you are entirely dependent on your past planning. Talk with your financial planner to ensure you have made good choices in terms of wealth-building and investment strategies. By being prepared and having a well-thought-out plan in place, you can navigate the challenges and enjoy a fulfilling early retirement.

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