3 Signs Retiring Early Could Be Disastrous for You

It's easy to see the appeal of early retirement. Instead of showing up to work every morning exhausted and annoyed after battling traffic, you could instead spend your days sleeping in, pursuing hobbies, and not having to log in to meetings.

But while retiring early may be something you want to do, that doesn't mean it's a good idea. Here are a few signs that it could, in fact, end up being a total disaster.

Image source: Getty Images.

1. You have decent savings, but not a whole lot

There's no single savings amount that guarantees you'll have enough money to support yourself in retirement. This applies whether you're retiring early, late, or on time.

But if you're retiring early, your money might need to last for more than 30 years. And remember, the earliest you can claim Social Security is 62. If you retire at 54, that means you'll have eight years where your portfolio will have to do all of the heavy lifting.

Before you retire, take a close look at your savings and make sure you've really built a robust enough nest egg for an early workforce exit. A $1 million IRA may be just fine if you're retiring at 65. At 55, it may fall short.

2. You're banking on risky investments to sustain a larger withdrawal rate

It's important to keep your retirement savings invested so that money continues to generate returns. The stronger your returns are, the easier it becomes to beat inflation and maintain your buying power without a job.

But if you're counting on risky investments to generate returns and allow for a comfortable withdrawal rate, you may be in for a rude awakening. All it takes is a single major market downturn in the first few years of retirement for your portfolio to sustain losses it never recovers from.

A better bet? Aim for a more even mix of stocks and bonds in your portfolio. And if you need supplemental income due to lower portfolio returns, join the gig economy to get it. Or wait a few years for your assets to grow a bit more.

3. You haven't factored in health insurance costs

Healthcare costs alone can sink an early retirement if you don't plan for them. Medicare eligibility doesn't start until 65. If you're retiring in your mid-50s, you might need to pay for coverage for roughly a decade. And that could get expensive.

Before you retire early, price out health plans in your area. If those premiums are heftier than expected, that may cause you to change your mind about early retirement -- or at least shift some plans and expenses around to make them manageable.

Early retirement can be certainly be enticing, but that doesn't mean you're prepared for it. Assess your savings, make sure you're investing in a reasonably safe manner, and plan for health insurance costs before ending your career at a young age. Otherwise, you may end up sorely regretting your early retirement decision.

The Motley Fool has a disclosure policy.