Early Retirement 101: Considerations, Challenges, Special Circumstances

Early Retirement 101: Considerations, Challenges, Special Circumstances

The Internal Revenue Service (IRS) defines retirement milestones for plan participants as a guide for eligibility, fee structures, and more as it relates to retirement accounts. While many people cannot retire until they’re age 65, there are caveats to retirement plans that may make early retirement more accessible for participants.

While many people work into their 60s and even 70s, there are participants who retire much earlier in life to focus on travel, hobbies, or other business ventures. NerdWallet notes that the FIRE (Financial Independence, Retire Early) movement makes early retirement less about leaving the workforce and more about flexible work to pursue other interests.

While you may have the ability to retire early, sometimes that means facing early withdrawal penalties, missing out on Medicare benefits, and other financial considerations. Read below to learn about retiring early, and the challenges and special circumstances to consider before making the decision.

Budgeting for the Future

When planning for the future, it’s essential to save enough money to last the duration of your retirement. For many working 401(k) participants, that may not be a problem. However, if you plan to retire early, you will need to have more money saved for the future that can cover everyday expenses, medical costs, home repairs, and other miscellaneous fees that fall into necessary and unnecessary spending categories. Without a consistent income from a career, you may have to adjust your budget and expectations.

If you’re not sure what it takes to secure a financially-sound future, use Slavic401k’s retirement planner calculator – a calculator that helps the individual investor create a retirement plan and set realistic goals.

Once you have a good idea of what you need to retire early, you may need to make some budget adjustments. This can be done through a variety of tools such as using the 50/30/20 budget rule, managing your budget digitally through financial apps or budget sheets, and finding ways to supplement income to pay for everyday goods and services. Slavic401k has a variety of blogs that cover retirement, financial planning, and economic trends to help you plan accordingly. View the blog to learn more.

How Early Retirement Impacts Social Security, Medicare, and 401(k) Plans

Social Security

If you’re eligible for Social Security benefits, there are strict guidelines that go into accessing those funds. The Social Security Administration (SSA) uses your birth year to determine when you are eligible for benefits, and in most cases, that doesn’t happen until people are between 65 and 67 years old. In some cases, such as early retirement, you can tap into your benefits early, but not before you’re 62 years old. Even then, you will be subjected to a benefit reduction, meaning that you will not receive the full amount of benefits that you would have if you waited until your full retirement age (FRA). View an FRA chart here.


The Balance Money outlines the importance of Medicare benefits for retirees. Because you won’t receive Medicare benefits until you turn 65, whether you retire early, you will need to secure your own healthcare coverage if you won’t have an employer. Private health insurance can be significantly higher in cost, and coverage may not be as good as it is on a group plan, which can increase service and prescription costs. HealthCare.gov can help you find good coverage at an affordable cost.

401(k) and IRA Plans

If you’re enrolled in a 401(k) or IRA, you are not eligible to withdraw funds until you turn 59½. Because of this, there are stringent rules in place that come with penalties for making early withdrawals, but if you find yourself in the position of retiring early, there is a chance you may need to tap into these funds.

Note that early withdrawals are often subjected to a 10% fee but could change depending on your plan manager and fee structure. While exceptions to the plans exist, they are dependent on the terms of your account. For example, a 401(k) plan may allow you to forego penalties if you’re at least age 55, but IRAs will not. Check with your plan manager to learn about the terms of your retirement account before filing for early retirement.

Special Circumstances

Special circumstances are considered for those who served in military or civic roles. Because their full-time jobs often begin at a younger age, they are eligible for retirement at a younger age, and therefore fall into a special category of retirees.

Eligible participants in these roles often have pension plans that allow them to retire with full benefits before reaching their full retirement age determined by the IRS and SSA. The Civil Service Retirement System (CSRS) has different regulations and standards for those who served in the military or civil roles, including exceptions to early withdrawal penalties, retirement based on years of service rather than age, disability, and more. Learn more about applying for CSRS benefits here.

Retiring early can be a great benefit, but it also requires proper planning and preparation early in your career. If you’re working towards FIRE (Financial Independence, Retire Early), you will need to save more, earlier in life, make riskier investments, maximize contributions, and perhaps multiple sources of income in order to set yourself up properly. Slavic401k has a guide for FIRE preparation that can help you plan ahead. If you’re looking for additional retirement planning tools, our blog and calculator tools can help you navigate your financial future.

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