Retiring in your 50s sounds great but comes with 3 big problems - USA TODAY

I’ll admit, there’s a part of me that would love to retire in my 50s. I have big plans for retirement, and I’d love more time to devote to my hobbies. But even though I’m prioritizing retirement savings now, I don’t know that I’ll actually retire that soon. The advantages of early retirement are obvious, but it has serious drawbacks too. Here are three you should bear in mind if you’re thinking about retiring in your 50s.

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1. Your savings have to last a lot longer

If you retire in your 50s, you can probably expect to spend about 30 years in retirement, and some people might even make it to 40 years. You’ll need a lot of money to cover your expenses during that time, so you have to get comfortable foregoing certain purchases today so you can save more for retirement.

An extra-long retirement also increases the risk of running out of money prematurely. It’s difficult to know exactly how much you’ll need for retirement under the best of circumstances, and with a 30-plus year timeline, there’s plenty of opportunity for unplanned expenses to throw off your budget. Even if it’s just a few thousand dollars here and there, that can add up over time, and you could find yourself without enough money to cover all of your planned costs in your final years.

If you want to avoid this, you should build plenty of cushion into your retirement budget and review your plan frequently to ensure you’re still on track for your goals. You should also have a backup plan in case you drain your savings too quickly. This might entail cutting back on travel and discretionary purchases or possibly going back to work for a while.

2. You’ll have difficulty accessing money in your retirement accounts

Most retirement accounts impose an early withdrawal penalty if you try to take money out before you turn 59 1/2. It’s usually equal to about 10% of the amount you withdraw. So if you take out $10,000 at 58, you’ll have to give $1,000 back to the government.

There are ways around this early withdrawal penalty. The government allows exceptions for things like large medical expenses or educational expenses. Certain account types also have exceptions. For example, the Rule of 55 allows 401(k) owners who quit or lose their jobs in the year they turn 55 or later to withdraw money from their 401(k) without a penalty. However, you can only take money from your 401(k) that’s associated with that job, not any other retirement accounts you have.

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Another way around this is Substantially Equal Periodic Payments (SEPPs). This withdrawal strategy lets you avoid penalties as long as you agree to take equal payments out of your retirement account for the longer of five years or until you reach 59 1/2. But if you fail to take all your SEPPs, you’ll get slapped with all the penalties you would have paid in previous years.

You could also stash some retirement savings in a taxable brokerage account. These don’t give you the same tax advantages as retirement accounts, but they also don’t have limitations on when you can take your money out. You could stash money you plan to spend before 59 1/2 here and then switch over to your retirement accounts once you’re free of the early withdrawal penalties.

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3. You won’t qualify for Medicare

You can’t sign up for Medicare until you turn 65, so if you retire in your 50s, you’ll have to pay for your own health insurance in the meantime.

If your spouse is still employed, you may be able to get on their health insurance for a while. Or you may be able to stay under your old employer’s coverage after quitting, but this is usually an expensive option. You can also purchase your own health insurance plan.

The one thing you don’t want to do is skip health insurance and hope for the best. All it takes is a single emergency to wipe out a good chunk of your savings and then your retirement plan is out the window.

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You’re better off planning for healthcare expenses. Premiums are the main cost you’ll have to face, but you should also set aside some money for deductibles and co-pays as well in case they come up. A health savings account (HSA) is a good place for these funds if you qualify for one.

It is possible to retire comfortably in your 50s, but you have to put even more thought into your retirement plan than someone retiring later. Go over your budget carefully and make sure you’ve left yourself plenty of wiggle room to handle whatever costs come up. And if you’re concerned about running out of money early, put off retirement a little while longer. The extra year or two in the workforce is worth it if it means you don’t have to worry about your bills later on.

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