Early retirement might seem like a dream, but if you're considering giving up your career for a life of leisure before your 65th birthday, you could be setting yourself up for some serious financial struggles later on.

In fact, there are three big reasons you might not want to retire until you're at least 65.

Jar labeled retirement with clock and coins sitting next to it.

Image source: Getty Images.

1. You'll see smaller Social Security benefits if you claim them

While 65 used to be full retirement age (FRA) for Social Security,, that's no longer the case. In fact, depending on when you were born, FRA (the age you can retire and get your standard benefit) could be anywhere from 66 to 67. If you start your benefits before then, you're subject to monthly penalties that add up to reduce benefits by 6.7% for each of the first three years you're early and an additional 5% for years before that.

Most people planning to retire before 65 will probably rely on their benefits, which means incurring more than a year of early-filing penalties. You could come to regret that later if you get less lifetime income from Social Security or if you find yourself struggling to make ends meet with a smaller benefit late in retirement. 

2. You won't be eligible for Medicare yet, so you'll incur substantial insurance costs

As you get older, having comprehensive health insurance becomes increasingly important because you're more likely to develop chronic or acute medical conditions. Unfortunately, you typically won't become eligible for Medicare until 65, so you'll need to buy your own insurance coverage until then.

If you retire before 65, that usually means giving up employer-subsidized insurance coverage before becoming Medicare eligible. You could end up paying a fortune for COBRA to keep your workplace coverage or get stuck buying an individual policy, which might come with high premiums and high deductibles. These early (and substantial) insurance costs could eat away at your retirement savings and cause financial problems later. 

3. You'll miss out on years of savings 

Many Americans have too little money saved for retirement. If you leave work before 65 and you're one of them, your early retirement date could exacerbate your savings shortfall. You become eligible to make catch-up contributions to tax-advantaged retirement accounts only after turning 50, so you'll be giving up some prime years when you could contribute a lot to your 401(k) or IRA. You will also rely on your savings for a longer time if you retire earlier, which means you raise the chances of running out of money.

If you have a very large nest egg and are confident you can easily pay for medical care and either delay claiming Social Security or get by with smaller lifetime benefits, you may decide that early retirement is right for you. But if you're not one of the small minority of Americans financially prepared for retirement before 65, putting in a few extra years on the job is probably your best bet.