Ah, retiring early. Is there a better daydream to have? Time for travel, time to spend with your loved ones, time to pursue all of those vocations you put aside in favor of paid work. As I've pointed out before, retiring early can be more than a daydream if you plan ahead and save and invest effectively.

But here's a shocking secret: As appealing as early retirement seems, for many Americans it's not so wonderful. Why? Well, some end up ... bored.

It makes sense. If you retire before your friends or your spouse, you may have no one to share all of that fabulous free time with. But boredom isn't the only reason retiring early may not live up to those daydreams.

The cost of retiring early
Health insurance continues to be a primary concern for retirees, and the cost just keeps on rising. According to Fidelity Investments, you and your spouse will need a savings of about $225,000 earmarked for your health-care needs in retirement. The folks at the Center for Retirement Research at Boston College agree; they estimate $102,000 per person of health-care costs in retirement. Retiring early gives you less time to build it up -- and more time you'll have to rely on it.

Retiring early will also limit your Social Security check and pension benefits. You can visit this calculator at the Social Security website to estimate your benefit -- and how it changes depending on when you retire. Delaying your retirement a few years might make a material difference in the money you have available for all of those daydreams.

The saving-and-spending trade-off
Delaying retirement by a few years can greatly increase your nest egg. Each extra year you work is one less year you'll have to support yourself in retirement -- and it's an extra year that compounding can use to make your nest egg bigger.

Let's see what difference a few years makes to a single $25,000 investment in the stock market when you're 25, assuming the historical 10% annualized return.


Age at Retirement










$1.1 million



$1.4 million



$1.7 million

See how much difference just a year or two can make? The more you've contributed over the years, the more you'll earn by delaying your retirement by a year or two -- and the more you'll have to live on when you finally take that step.

Earn more now
You can extend those extra compounded gains by investing in top-notch mutual funds or solid, growing companies that exceed the market's annual returns. For historical context, the following list shows you the returns, on an average annual basis, of several well-known companies over the past two decades.

  • ExxonMobil (NYSE: XOM): 15%
  • Home Depot (NYSE: HD): 20%
  • Pfizer (NYSE: PFE): 14%
  • Walgreen (NYSE: WAG): 17%
  • Wells Fargo (NYSE: WFC): 19%
  • McDonald's (NYSE: MCD): 14%
  • Texas Instruments (NYSE: TXN): 14%

If you'd like to be more diversified, a number of mutual funds offer market-beating returns. The Vanguard Capital Opportunity (VHCOX) fund, for example, sports a 10-year average annual gain of more than 15%, as does the T. Rowe Price New Era (PRNEX) fund.          

Do your homework
If you're thinking about retiring early, make sure you do your homework. Estimate how much you'll want to spend during your retirement -- and don't forget health care, travel, gifts, or utilities. Figure out how much your savings are likely to grow by retirement, and see how likely it is that you can afford an early retirement.

Take a more personal inventory, too. Do you have enough interests and activities planned? Will you and your spouse annoy each other? Will you want to re-enter the workforce later?

Our Motley Fool Rule Your Retirement service can help you make sense of your savings -- and your plans. It distills vital information into a concise monthly package and offers recommendations on asset allocation, stocks, and mutual funds. It also profiles people who retired early. Try it for free for 30 days -- there's no obligation to subscribe.

Longtime Fool contributor Selena Maranjian owns shares of Home Depot and McDonald's. Pfizer is a Motley Fool Income Investor recommendation. Home Depot and Pfizer are Motley Fool Inside Value recommendations. The Motley Fool is  Fools writing for Fools.