Many workers dream of retiring early and enjoying their freedom while they're relatively young. In fact, a good 25% of employed baby boomers think they'll retire prior to age 65, according to new data from the Insured Retirement Institute. If you're looking to leave the workforce ahead of your peers, here are a few things you should consider before taking that leap.

1. Your Social Security benefits will be reduced if you claim them early

Your Social Security benefits are calculated based on what you earned during your top 35 working years, but once your full monthly benefit amount is established, you can only collect it in full upon reaching full retirement age. Your full retirement age is based on your year of birth, as follows:

Year of Birth

Full Retirement Age




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months



Data source: Social Security Administration.

Now you are allowed to file for Social Security as early as age 62. In fact, that's precisely how many seniors manage to retire well before full retirement age. But be aware that you'll lose about 6.67% of your full monthly benefit for each year you file early, and 5% for each year thereafter. In other words, if you're looking at a full retirement age of 66 but take benefits at 63, you'll slash them by 20%.

Older man out on a boat smiling.

Image source: Getty Images.

2. You'll be on your own for healthcare

Countless seniors rely on Medicare to pay for their health-related needs. The problem, however, is that Medicare doesn't kick in until age 65, so if you retire before then, you'll need to figure out health insurance on your own. Now if your spouse is still working at that point and you have the option to get on his or her group health plan, you may be in luck. But paying for coverage under COBRA or buying your own plan on the open market could be expensive, so get a sense of your costs before making your retirement official, and be sure your savings will suffice in covering them.

3. You can keep working nonetheless

Maybe you're eager to leave your full-time job before the age of 65 because it stresses you out, you hate the commute, and it just plain monopolizes all of your time. But that doesn't mean your options for generating income are done with. If you want to retire prior to 65 but also live comfortably or continue saving, there's no reason to write off the possibility of working in some capacity, whether it's consulting a few hours a week in your former field or monetizing a hobby you enjoy.

Working as an early retiree is a smart move not just from a financial perspective, but a mental one as well. Research from the Institute of Economic Affairs tells us that retirement increases the likelihood of suffering from clinical depression by 40%. If you're still fairly young with a relatively high energy level, you might quickly grow restless with a schedule filled with unstructured days. On the other hand, if you decide to work in some capacity, you'll not only have a fulfilling means of occupying your time, but an opportunity to stay busy without having to spend money.

There's nothing wrong with retiring early if you're prepared for it. But don't just look at your level of savings when contemplating this major decision. Rather, think about the various consequences of leaving the workforce when you're still relatively young and make sure it's the right move for you. You're better off waiting a year or two than rushing to retire and regretting it later on.