Retiring Early Is a Mistake If You Haven't Done These 2 Things

By Kailey Hagen, CFP – Mar 13, 2026 at 3:00PM ESTKey PointsYou won't be able to join Medicare until you're 65.You'll pay a 10% early withdrawal penalty for taking money out of your retirement account before age 59 1/2.The right withdrawal strategies can help you avoid the early withdrawal penalty.The advantages of retiring early are easy to spot: You'll have more time for your hobbies and friends. You won't have to wake up early and sit through a long morning and evening commute. And you won't have to deal with job-related stress. But there are downsides to retiring early, too. Fortunately, it's possible to work around them, but only if you know what to expect. Make sure you have a plan for the following two things before you quit the workforce. Image source: Getty Images. 1. Devise a plan for healthcare Most retirees rely on Medicare to cover at least part of their retirement healthcare costs, but you're not eligible to join until you're 65. So if you plan to retire early, you'll need additional coverage to protect you in the meantime. You may be able to remain on your employer's health insurance plan for up to 18 months after you retire, but that could be an expensive option. If your spouse is still working, you may be able to join their policy instead. Or you can purchase your own health insurance plan directly. Whatever you do, don't skip coverage, even if you're healthy. One unexpected illness or injury could wipe out a huge chunk of your savings if you're paying completely out of pocket. This could force you to settle for a lower quality of life going forward. Or you may need to come out of retirement so you have a paycheck to cover your dwindling savings. 2. Know how you'll get around the early withdrawal penalty Those who retire before 59 1/2 will need a strategy to avoid the 10% early withdrawal penalty. This rule makes it costly to access your retirement savings before this age. Fortunately, there are workarounds. If you retire in the year you turn 55 (or 50 if you're a public safety worker), you can take penalty-free withdrawals from your most recent 401(k) only. And you're always free to withdraw contributions from Roth IRAs tax- and penalty-free. Another option is substantially equal periodic payments (SEPPs). This is where you agree to withdraw a certain amount from your retirement account annually for the longer of five years or until you turn 59 1/2. However, if you fail to take your SEPPs as scheduled, you'll pay the 10% early withdrawal penalty on all of your earlier SEPPs. You could also keep some savings in a taxable brokerage account. While these accounts don't have the same tax advantages as retirement accounts, they also have fewer limitations on what you can do with them. It's also fine to use a combination of these strategies. Just make sure you have a plan before you leave the workforce so you don't accidentally trigger the 10% penalty.Read NextMar 14, 2026 •By Maurie BackmanThis Common Budget Habit Could Be Quietly Destroying Your Retirement SavingsMar 14, 2026 •By Maurie BackmanIf You're Behind on Retirement Savings at 50, Here's a Strategy That Could Help You Catch UpMar 14, 2026 •By Kailey Hagen, CFPThis Is Where I Start Saving for Retirement Every YearMar 14, 2026 •By Kailey Hagen, CFPYou're Beating the Average Retirement Saver if You Have More Than ThisMar 14, 2026 •By Maurie BackmanThis Retirement Account Lets You Avoid RMDs -- But There's a CatchMar 14, 2026 •By Kailey Hagen, CFPThis Possible Social Security Change Could Make Saving for Retirement Even HarderAbout the AuthorKailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning.

Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.TMFKailey