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The pandemic has caused us all to reevaluate our life trajectories. The desire for flexibility to pursue passions and interests outside of employment has increased dramatically. Many people have added early retirement to their list of financial aspirations. If you are dreaming of leaving the workforce early, it is an absolute must to map out a financial roadmap to get you there.

On its face, the early retirement cashflow question is simple: How much income will you have when you stop working, and how much money will you need to cover your expenses? What muddies the financial waters is figuring out what your monthly spending will look like, particularly if you are going to be out of the labor force for decades. Will you have plenty of money to do what you wish? Will you be able to live the life you are envisioning with the funds available to you?

In the early retirement calculation, these five big financial factors are often overlooked:

Healthcare expenses:

How much you will pay for healthcare as you age can vary considerably. There are plenty of unknowns, like what your overall health will be, how much extra assistance you may need, and what expenses you will have from doctor’s visits, prescriptions, and additional healthcare services. These variables are even more difficult to nail down if you plan to retire early, as the runway to get you through retirement is quite long. Even if you are perfectly healthy now with few health-related expenditures, things can change significantly with an unexpected illness or accident.

Health insurance:

You must plan for your health insurance needs. Once you turn 65, you become eligible for Medicare. Even those plans are limited, creating a potential need for supplemental insurance and additional premiums. Retiring early necessitates paying out of pocket for health insurance for those gap years until the Medicare program becomes available. If you are accustomed to health insurance coverage through an employer, the cost of premiums for individual plans may cause major sticker shock.


If you are pondering retiring early, it is likely you already have a sizeable nest egg saved in tax-deferred retirement accounts, such as 401(k)s and Traditional IRAs. The beauty of these accounts is that you were able to fund them with pre-tax dollars. The flip side? When you tap into those funds to pay for your retirement expenses, those deferred tax payments become due on any funds withdrawn from the account. That means the lump sum in those accounts does not fully translate into money you can live off of, as you will need to set aside a portion to pay the tax bill. One more caveat to note: Withdrawing from retirement accounts early can trigger additional hefty tax penalties.


Regardless of your employment status, housing expenses stick with you to the end. Retirees must manage mortgages, utilities, maintenance bills, and general upkeep of their homes. As you age, your living situation will likely shift. You could be forced to do big renovation projects or remodels to safely stay in your home. You may need to move to another property that is more elder-friendly. If you need to transition to an assisted living facility, your housing costs could skyrocket.

Lifestyle inflation:

As the saying goes, during retirement, every day feels like a Saturday. When you are untethered from a five-day work week, you may be inclined to turn to your wallet more frequently to stay occupied. Those added expenses for one-off purchases, treats, trips, or hobbies can steadily add up. Remember, as an early retiree, you likely have many more years to rely upon your accumulated wealth than people who hold off until average retirement age. Anyone can retire early. The question is, what do you want your daily life to look like? Are you willing to sacrifice certain purchases and stick to a strict budget? Would you rather be freer with your spending? In the end, it comes down to your comfort level with your desired lifestyle. Those choices are up to you.

The ultimate goal of retirement should be to live out the remainder of your days happily and financially free. If you would like to dive deeper into your unique situation, don’t hesitate to reach out. We would be happy to chat. Initial consultations are always free.