Retirement Retirement Planning

7 Lies You've Been Told About Retiring Early (And Probably Believed)

Make sure you know the facts before you leave work.

By Catherine Collins , Edited by Laura Hohenstein

Updated Oct. 22, 2026

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Many Americans want to retire early, but workers should be aware of some misconceptions before taking that leap. Even if you've saved in a 401(k) retirement plan or an IRA for decades, leaving the workforce early still takes significant planning to ensure you can fund your retirement for the long term.

Here are seven common misconceptions about retiring early that workers need to know.

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Buying your own health insurance before age 65 is affordable

One of the biggest expenses when you retire early is health insurance. That's because you are generally not eligible for Medicare until age 65. So, you will be responsible for buying insurance until you reach that age. Some people assume they can just buy their own insurance affordably on the exchange, but they may not realize how expensive it will be.

In fact, health insurance premiums can be up to three times higher for older adults. Additionally, there are no more enhanced premium tax credits for HealthCare Marketplace plans because they expired in 2025. Because of that, people who want to retire early need to plan carefully for health insurance, such as joining a spouse's plan or setting aside extra money to cover these costs.

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You can retire anytime as long as you save 25x your income

Many people use the metric of having 25 times your annual spending saved as a key milestone for retiring. However, these numbers are specifically for a 30-year retirement plan. If you're retiring early and plan to be retired for 40 years or more, it's likely you'll need more money saved in your retirement plan, especially if you're planning for a more conservative withdrawal rate. Currently, Morningstar recommends a 3.3% withdrawal rate for someone planning to be retired for 40 years. That means you may have to save more in your investment accounts than you think in order to retire early.

You can't withdraw your retirement savings until you're 59.5 years old

Many people believe you can't withdraw from your retirement savings until you're 59 and a half. This is a common misconception because most retirement plans require you to pay a 10% penalty if you withdraw money early. However, there are a few exceptions. There's something called the rule of 55, which states that if you retire at age 55, you can start withdrawing early from that employer's retirement plan with no penalty. This doesn't apply to other retirement plans you may have with different employers, however.

There are also 72(t) withdrawals, where you agree to scheduled withdrawals according to a specific plan that follows IRS rules. There is no early withdrawal penalty for qualified 72(t) withdrawals.

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It's ok to take Social Security early at age 62

Many people planning to retire early take Social Security at 62 to supplement their retirement income. While this is allowed, it permanently reduces your monthly benefits for the rest of your life. The Social Security Administration shows that people who claim Social Security at age 62 receive 30% less on their checks than if they wait until full retirement age, which is 67.

Your spending will be much less in retirement

Many people assume that once they retire, they'll have adequate cash flow because they'll be spending less than they do while they're working. However, that is not always the case. Many retirees today still have a mortgage payment or are paying rent. Additionally, healthcare expenses rise as you age. Fidelity estimates that someone aged 65 and up spends, on average, $185,500 on healthcare costs in retirement.

Finally, once people retire, especially if they retire early, many enjoy hobbies and travel, which can be costly. So, rather than assuming your expenses will decrease, consider the retirement lifestyle you want and budget accordingly.

If the stock market is strong, you can retire early

Many people believe that if the stock market is strong and they're invested in it, they'll be able to retire early. However, the stock market constantly ebbs and flows. A strong stock market one year does not guarantee that it will stay strong the next. Plus, if the market is low in your first few years of retirement, it can negatively impact your nest egg for decades to come, called a sequence-of-returns risk.

Keeping a cash reserve to cover unexpected expenses can help you avoid withdrawing from your 401(k) during a downturn. It can also prevent you from going into high-interest credit card debt, which can also negatively impact your finances in retirement.

You only have to worry about income taxes when you make withdrawals

When people plan their retirement withdrawals, many think those withdrawals will only affect their income taxes. However, a high withdrawal income can also increase Medicare premiums through IRMAA, which stands for Income-Related Monthly Adjustment Amount. IRMAA is the extra money high-income earners pay each month toward Medicare premiums. These surcharges are based on the income you received two years previously, another reason to carefully plan your withdrawals and Roth conversions.

Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why

Bottom line

Retiring early is achievable, but believing some of the myths above could lead to financial mistakes. Retiring early takes significant planning, careful tax optimization, and a realistic view of the true cost of early retirement. If you need help or aren't sure you're making the best financial decisions for you, you can always consult with a financial planner.

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