Nov 10, 2026

8 Money Decisions Most People Get Wrong Before Early Retirement

These are very common, so try to learn from others' mistakes.

Planning to retire early? Before you kick back and live the dream, be careful you don’t wind up in financial trouble.

There are several money decisions people get wrong, overestimate or completely forget to account for prior to retiring early. What are they?

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Read on to find out so you can plan accordingly for your golden years.

1. Underestimating Healthcare Costs

Leaving your job before 65 often means losing employer health insurance. And, per Whitney Stidom, vice president of consumer enablement at eHealth Inc, private health insurance costs anywhere between $500 and $800 per month.

People often assume that once they’re eligible for Medicare, their healthcare expenses will drop. However, that is not so. Beneficiaries still face premiums, deductibles and prescription drug costs. Medicare also does not cover dental, hearing or vision. Stidom put the average, total cost of retirement healthcare at $175,000.

Many retirees claim Social Security as soon as they’re eligible. Yet, Xhensila Lala, economist and brand strategist at William Morris Wallpaper, explained this is not wise. Claiming Social Security at 62 permanently reduces monthly benefits up to 30% until full retirement age. If retirees wait until 70 to claim Social Security, however, their monthly payment will be 76% higher for the rest of their lives.

3. Assuming Expenses Will Drop

Many people assume their expenses will drop once they are retired because they no longer having to commute, buy work clothes or pick up the tab on client lunches. But, according to Peter Colis, CEO at Ethos, expenses don’t actually drop — they just shift.

Retirees are now spending more on travel, hobbies, restaurants, and overall free time. Additionally, the company where they worked may have been paying for their car or health insurance, for which they are now responsible.

4. Prematurely Canceling Life Insurance

Colis stated people who retire early sometimes cancel their life insurance policies in order to free up premium payments and cover living expenses. However, there could still be family depending on that insurance money should something happen to the policy holder — and cancelling the policy robs them of that.

Colis cautioned policies may also come with unexpected surrender charges. And, if the retiree decides to reinstate the policy at a later date, it will be far more expensive because of the retiree’s advanced age.

5. Neglecting To Budget for Home Repairs

It’s difficult to budget for expenses that take you by surprise, which is why many people forget to factor in home repairs. They may have accounted for utilities, mortgages, taxes, and property insurance. But homes age and appliances break. Retirees may need a new roof, paint, AC, and plumbing — particularly due to the expanded time frame.

6. Neglecting To Budget for Inflation

Melanie Musson, insurance and finance expert at Clearsurance.com, stated inflation tends to cost retirees much more than they anticipated — especially since there are more years for inflation to mount when one retires early. And, adding insult to injury, retirees will be pushed into a higher tax bracket if they take too much money out of their retirement accounts in order to make up for the added cost.

7. Utilizing a Standard 4% Withdrawal

When one retires early, their savings need to last longer than the average retirement -- perhaps a total of 35 to 40 years. Oliver Kevin Morrisey, inheritance and estate lawyer at Empower Probate Lawyers, explained that the 4% withdrawal rule is typically taken as gospel and applied universally, but it was never intended for an extended retirement. Retirees should consider a withdrawal rate closer to 3% for an extended time horizon.

8. Expecting Predictable Returns

The ups and downs of the market affect retirement savings. And, per Trevor Houston, CEO at ClearPath Wealth Strategies LLC, people often assume their investments will earn average, predictable returns each year — but that’s not how the market works. Financial markets are simply not consistent on an annual basis. You could wind up with less money to live on than expected.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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Written by

Cara Danielle Brown

A graduate of Northwestern University's School of Communications, Cara has worked in both publishing and Hollywood as a journalist, essayist, and script writer. Recent bylines include Variety, Travel & Leisure, Huffington Post, Shondaland, MSN, Cosmopolitan, and Yahoo! Finance.For her work as a script writer, she was awarded the Humanitas New Voices Prize for her nuanced writing on the human condition; an award Barbra Walters once called The Pulitzer Prize of American Television. In her spare time, she enjoys discovering new restaurants, meeting new and interesting people, and snuggling every dog and cat in a 10-mile radius.

Edited by

Zuri Anderson

Zuri is an editor with over 8 years of digital content and news experience. When she's not managing her freelance writers, voraciously editing copy and coming up with engaging stories, she's catching up on her favorite shows, books, movies and video games.