5 Financial Milestones That Could Mean You're Ready To Retire Early

The decision to retire is one that will be unique to everyone's life circumstances. Some Americans will wait long into their 60s to trade in their work boots for more casual digs, and others seek a pathway to retirement as early as possible. Those pursuing the FIRE strategy may realistically be able to retire in their 30s (granted they make a few important sacrifices along the way). You might not be seeking to exit the workforce that early, but the average American does take their leave from this obligation at 62, and therefore notably earlier than the full retirement age of 67. Retiring early brings a few important considerations into the mix. It can also threaten your long term success in retirement if you aren't completely prepared for the additional years of life without a paycheck.

Some key milestones can help clue you into your level of financial viability though. Managing your finances without major debts continuing to influence your short term decisions, for instance, is a crucial step in the right direction. Others include having a plan in place for Social Security benefits, which may not be available to you right away if you're retiring early, as well as health care needs. Finally, some important savings targets and budget testing options can also make a big difference in your readiness to make this big shift. There's the emotional elements of retirement to consider, too. These are important factors that can sway your decision. But without the financial backing to make the endeavor a possibility, you'll be setting yourself on a path to hardship.

Managing ongoing debts like a mortgage repayment after making the leap into retirement isn't a dealbreaker. Some retirees will want to move shortly after they leave the workforce, perhaps even to a new state that won't tax their Social Security distributions. This may come with a new mortgage obligation (perhaps one that's significantly reduced thanks to a large down payment from the previous home's equity value). However, there's a big difference between products that are largely thought of as "good" and "bad" debts. Mortgages tend to fall into the "good" side of things while high-interest tools like credit cards can stray far into the "bad."

Those hoping to retire soon will want to take a good look at their financial picture, and pay careful attention to the monthly debt servicing costs they incur. If you're still paying off credit cards then you're not likely ready to retire. The typical credit card bill suffers from an interest figure between 20.18% and 27.39% (and averaging 23.79% via LendingTree, across all new card offers as of January 2026). Retiring while still paying these bills will drain your nest egg quickly. On the other hand, eliminating this expense and reducing or negating other debts will give you far greater financial mobility as you change over to an income model derived from your investments rather than your time. Keeping more in your pocket allows you to enjoy more of life's pleasures while also holding onto the all-important principal value of your retirement accounts.

Health expenses are no joke at any phase of life. Spending on this critical budget item averaged $14,570 per person in 2023 (with a total spend of $4.9 trillion). This figure has steadily ticked upward over the decades, and there's little expectation of a major change. This means that health expenditures, on the whole, will only increase as time marches forward. Compounding this fact, older Americans tend to spend more than younger ones. Therefore, your annual expense at the doctor's office will be hit with two natural inflationary forces with each passing year. A Fidelity report found that a typical 65-year old who retired in 2025 can expect to see a remaining lifetime health care expense totaling $172,500.

The enormous weight of this necessity demands a plan. If you don't have a strategy in place to handle your ongoing care needs, you'll face some truly dire choices: At the most dramatic end of the spectrum, you're likely to die early, run out of money, or both. Investing in a Health Savings Account (HSA) provides a direct opportunity to amass wealth in a tax-advantaged account designed to cover medical expenses. Long term care coverage is another tool that can be significantly beneficial, but this is a policy you'll want to line up as early as possible. Waiting only makes the policy more expensive!

Whether you'll be seeking to retire before or after 62, an understanding of where your Social Security benefits lie is important. Eventually, you'll start drawing funds from the program, and this will add a dynamic, additional stream of income into the picture. If you're hoping to retire before full retirement age, however, starting your benefits will come along with a reduction (30% off the full benefit amount if you initiate distributions at 62). Those retiring before 62 will need to ensure they have a plan to bridge the gap.

However, important planning features go deeper. You don't have to start taking benefits just because you've stopped taking a paycheck or you've hit 62 or 67. You can wait until 70 to start drawing benefit checks, with a bonus rate tacked on to incentivize this delay. Some people who plan to retire early will want to also start taking benefits early. Others have a workaround in place and will work part-time, take larger distributions early on, or live a little more frugally to add more growth into their benefit amount. Regardless of the approach that works for you, knowing that initiating benefit payments is a complicated matter and coming up with a strategy that works for your needs is essential.

One excellent option for retirees concerned about their long term financial solvency is to run a stress test. If you think you may be ready to retire, trimming your current expense load down to match what you'll have available once you leave the workforce can give you a much clearer picture of the lifestyle you'll enjoy. Generally speaking, experts suggest that retirees need roughly 70% to 80% of their pre-retirement income to enjoy the same sort of lifestyle once they give up work. If you have reached the financial targets that can sustain this drawdown level, shaving 20% or more off your existing expense load and living with this new restriction on your spending for a few months while you have a paycheck in place to act as an emergency release valve can enlighten you to a far greater degree than any work with a calculator you might perform.

If you can objectively say that your life remains at a comfortable level while living on your post-working income platform, you are likely ready to make the move. Some people won't be emotionally ready to give up work at this stage, but that only creates more opportunity later down the line. Adding a few years of additional saving while preserving the principal of your accounts after you've hit this important milestone will only solidify your position and add to your ability to succeed financially in retirement.

Perhaps the most concrete milestone involves hitting your savings target. Without this piece of the puzzle locked into place, none of the other elements can hold their weight. But hitting your target often isn't enough. Retirees are living longer than ever, and many savers underestimate their needs at this phase of life, both as a result of elongating lifespans and other complications. Surpassing your savings target (and maintaining a flexible goal to handle ebbs and flows in your life circumstances as you progress through your working years) is a potent sign that you may be ready to hang it up for good.

Most Americans, as of 2024, plan to save for a retirement lasting 20 years or less, according to a CNBC survey. More shocking still is the reality that at least 20% (and as many as 46%) of Americans have no retirement savings at all. Obviously, failing to save for retirement will put you at risk of never being financially ready to make this leap. But underfunding your accounts based on incorrect assessments of your needs can be devastating, too. Failing to account for the entire scope of your retirement needs, especially given the impact of things like rising health costs and inflation, can result in severe personal crisis. Retirees won't be excited to rush back into the workforce, and a new role that provides the funding and flexibility you need may be difficult to come by as a 70- or 80-something. Therefore, overfunding (but not going wild with retirement contributions) will give you the best possible foundation to work from as you prepare to make this important shift.