It's easy to dream about long days where you do whatever you want, whenever you want. You don't have to answer to a boss or clock in and out from the rat race. However, early retirement can have some negative downsides that can far outweigh its positive outlook. 

While many retirees stay retired, many also choose to return to work. In 2023, AARP reported that some 2.4 million people who retired during the pandemic returned to work shortly after the US lifted restrictions. 

If you're planning to retire before age 67 (for anyone born after 1960), it's important to analyze the possible drawbacks of early retirement. How you retire will directly impact your Social Security benefits and how much you can draw from investments like your 401K and IRA accounts. To help you weigh early retirement costs, we've built a list of issues that may make early retirement less attractive. 

1. Mental Health 

Working can give us a sense of purpose, something to fill our days. It's also something we're used to doing. We're used to getting up early and working a 9-5, coming home, eating, showering, vegging for a couple of hours, and crashing. 

When you drastically change that routine to something completely different, it can take some adjusting. For some people, the adjustment is too much, and their mental health takes a hit. Some people can thrive, even with such a big change to their daily norms. Retiring early can be great if you've prepared for the possible havoc on your mental health. 

2. Budgetary Concerns

If you're not currently using a budget to track your bills, disposable income, and discretionary spending, retiring will only complicate your finances further. When you don't know how much you're spending, “winging it” will only cause you to run your savings down to nothing by overdrawing from your nest egg sooner than you expected. 

Retiring requires some planning on how you hope to pay for your monthly bills and any extra activities you plan to participate in. Without that plan in place first, you will have a hard time ensuring you can stretch your savings, and you may find yourself paying out to fill your long days. 

3. Sacrificing Higher Pay

Choosing to retire can have lasting ramifications on how much you're able to bring in as income. You'll no longer be eligible for pay raises; you won't have a job match for your 401(k), and your contributions to your IRA may dry up. 

You'll also have to weigh the change to your pension. If you're working as part of a union or have been promised a pension for your years of tenure at your job, retirement can affect how much your pension pays you in the years after you retire. If you're at all concerned about your earnings, reevaluate your finances before making any big decisions. 

4. Penalties and Fees

Retirement accounts can be tricky. Most want you to wait until you are 65 to start withdrawing. As the new retirement age of 67 kicks in, penalties and fees for early withdrawals may also last an extra two years. 

If you're looking at early retirement, you'll want to consider your sources of income. If you've stuck most of your money in accounts that will penalize you for withdrawing your money early, you might want to think about scaling your work back but holding off retirement until you've reached at least 65. 

5. Cash Flow is an Issue

Another issue you may run into when you're considering early retirement is your access to cash and active cash flow. While some companies are avoiding cash payments, many more still see cash as king. Having those active cash streams is important when you retire. 

You want a diversified portfolio of your money supply, but you're also going to want to have a couple, if not several, ways to keep bringing in money so you're not eating up your savings. Plan for the here and now before you concern yourself with financial issues like Social Security and senior citizen discounts. 

6. What Emergency Fund?

Building an emergency fund is essential to planning for retirement (whether you retire early or not). If you can't cover three to six months of your bills, should you lose your job, retiring early may be out of your financial ability. 

Millions of Americans aren't able to cover an emergency that reaches $1,000. You'll want that ability to cover your bills should you want to return to work and find it harder than you imagined. 

7. Debt Crisis

If you're still carrying debt, retirement may not be the best financial move. Debt carries interest, and the last thing you want is to eat through your savings by paying interest. 

As a retiree, you want to enjoy these years when you aren't required to work. That becomes much harder to do if your money is going largely to cover your debt. If this is the only thing holding you back, work with a certified financial planner to resolve your debt and go into retirement free and clear. 

8. No Future Plans

You are not alone if you've dreamed of long, lazy days doing nothing but what you want—sleeping in, drinking coffee, and binge-watching your favorite shows. However, it won't take long before that routine drags you down. 

If you don't have a plan for how you want to spend your long, lazy days, you might want to think about it. Going into retirement without a plan can lead to loneliness and depression. If you decide full retirement isn't really what you wanted, you may find it difficult to go back to work. 

9. Social Security Problems

If you can do it well, retiring early can be fun and a blessing. However, you'll need to understand its impact on your Social Security benefits. The SSA calculates your Social Security benefits using your AIME (Average Indexed Monthly Earnings). This calculation gives the Social Security Administration a baseline for your earnings once you hit 67. 

One upside of Social Security is that your payment won't decrease because you stop working. However, be sure that when you retire, you are earning the most financially that you possibly can. This income bracket will directly affect your SS payout when you finally file a claim. 

10. Healthcare Bleeds You Dry

One mistake many early retirees forget to factor in is the horrendous cost of healthcare. As we age, the amount we pay for insurance increases. We also become susceptible to falls and other age-related issues. 

Because of this, our medical costs can skyrocket once we officially hit retirement age. If you haven't factored in just how much medical, dental, and vision insurance may cost you once you retire, it's a discussion you need to have. These costs can run through your savings in a matter of months if you run into health issues, and that could leave you needing to go back to work when you're no longer capable of doing so. 

11. Pinch Your Pennies

Obviously, the sooner you retire, the longer your nest egg is going to have to last. Even bolstered by Social Security, you could end up in dire straits if you don't pinch your pennies. 

Hire a financial planner to go over your savings and investments. Be sure your retirement accounts can cover your standard of living (even adjusted for inflation) before you pull the plug on your employment. At least you'll retire knowing how much you can spend and what you must be able to save. 

12. Boredom Blues

While long, lazy days seem like bliss in the beginning, they can quickly become unbearable when you're bored out of your mind. Because most of your peers are still working 40-hour weeks, finding people with the time to hang out can be challenging. Every day is the weekend for you, but they actually have to get to Friday before they can relax. 

When you retire early, boredom can quickly set in. If you're thinking about early retirement, be sure to have a plan in place on how you'll deal with the mental load and activities lined up to help curb boredom before it drives you crazy.