Retirement Retirement Planning

The Real Cost of Retiring at 60 Instead of 65 - We Did The Math

The gap is bigger than most people expect across three categories.

By Josh Koebert , Edited by Laura Hohenstein

Updated May 26, 2026

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For many Americans, retiring at 60 sounds like the ultimate financial milestone. But the difference between retiring at 60 and waiting until 65 isn't just five years of paychecks. It's a compounding set of financial penalties that most retirement plan calculators don't put front and center.

Across Social Security, health insurance, and portfolio growth, the cumulative cost of retiring five years early can run well into six figures. Here's what the math actually looks like.

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Social Security: A permanent reduction that follows you for life

You can't claim Social Security at 60. The earliest claiming age is 62, which means retiring at 60 requires two full years of drawing down savings before any Social Security income arrives. But the bigger penalty comes from what happens when you do claim.

Claiming Social Security at 62 results in a permanent reduction of up to 30% compared to waiting until full retirement age, which is 67 for anyone born in 1960 or later. That reduction doesn't phase out over time — it applies to every check you receive for the rest of your life.

The maximum monthly Social Security benefit for someone retiring at 62 in 2026 is $2,969, compared to $4,152 at full retirement age of 67. That's a difference of $1,183 per month — or $14,196 per year — every single year.

For the average worker, the gap is smaller but still significant. If your full retirement age benefit would be $2,500 per month, claiming at 62 drops that to $1,750. Over a 25-year retirement, that's a difference of $225,000 in cumulative Social Security income from one decision made at 62.

And that's before accounting for the two years from age 60 to 62 when no Social Security income is available at all. A retiree spending $60,000 per year would need to draw roughly $120,000 from savings just to cover those two years before the first check arrives.

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Health insurance: The five-year gap before Medicare

Medicare doesn't begin until age 65, which means anyone retiring at 60 faces five full years of private health insurance costs — one of the most significant and underestimated expenses in early retirement.

In 2026, that coverage typically comes from the ACA Marketplace. A 60-year-old couple earning $85,000 — a typical income for early retirees drawing from savings — could pay a yearly ACA premium of more than $22,000 in 2026, according to KFF estimates. Older adults also face significantly higher premiums because insurers can charge people in their early 60s up to three times more than younger enrollees.

Over five years, that adds up fast. A couple paying roughly $22,000 per year could spend $110,000 on premiums alone before deductibles and copays. By comparison, standard Medicare Part B premiums in 2026 are projected to cost under $5,000 annually for a couple. The health insurance gap between ages 60 and 65 can easily become one of the biggest hidden costs of early retirement.

Portfolio impact: Five more years of withdrawals, zero contributions

The biggest hidden cost of retiring at 60 may be what happens to your investment portfolio. Retiring five years earlier means you stop contributing sooner and start withdrawing money sooner. That combination can significantly reduce the size of your nest egg over time.

For example, a $1 million portfolio earning an average 7% annual return could grow to roughly $1.4 million by age 65 if left untouched. But if withdrawals begin at 60, the portfolio has less time to compound and a smaller balance to support the rest of retirement.

Early withdrawals also increase something known as sequence of returns risk. This happens when market downturns hit in the first years of retirement, forcing retirees to sell investments at lower prices to cover living expenses. Starting withdrawals at 60 instead of 65 creates five additional years of exposure to that risk before Social Security begins replacing part of your income. Over a long retirement, that difference can mean spending more conservatively or running out of money sooner than expected.

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Bottom line

None of this means that retiring early is the wrong call. For people with substantial savings, a pension, health considerations, or simply a clear picture of what they want retirement to look like, the five-year difference may be well worth the cost. The goal here isn't to discourage early retirement, but rather to make sure the numbers are fully visible before the decision is made.

The three costs — a permanent Social Security reduction, five years of private health insurance before Medicare, and a portfolio that starts drawing down earlier — are each significant on their own. For anyone seriously considering whether to retire early, running the full numbers across all three categories is the most important financial exercise you can do before you hand in your notice.

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