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3 characters you are heading to retire early

It takes decades to plan retirement, and establishing a nest egg worth hundreds of thousands of dollars or more is not easy. But even though many workers are sadly unprepared, others may actually be on route to retire early.

Early retirement is difficult to achieve, but not impossible. To retire in your 50s (or even earlier), you need smart savings habits and a good understanding of some of the challenges that come with early retirement. If these three signs sound familiar, you may be on the right track.

  Man and woman sitting in armchairs on the beach

Image source: Getty Images.

. You save more than you need each month

One of the reasons why early retirement is so challenging is that you need to save more money and you have fewer years to do it. Especially when life expectancy continues to increase (one-third of today's retirees can expect to live to their 90s or beyond, according to the Social Security Administration), you could end up spending nearly half your retirement life if you leave the workforce early. That means you have to add your savings.

When planning for retirement (no matter what age you want to do it), having a savings goal is crucial. One way to figure this out is with a pension calculator to estimate how much you need to save before you retire – in addition to what you should save each month to achieve that goal. Once you've got your results, if you think you've saved more than necessary each month, it's a good sign that you end up with a solid stash at an earlier age.

But remember that this alone does not cover early retirement. Double check your plan by recalculating your retirement number with your desired retirement age. Your results are likely to be different, but if you still save enough each month to reach your new goal, you're right on the track.

2. You are in good health and have a plan to cover health care costs.

Health care costs can quickly sabotage retirement, but they can be even more taxing if you retire early. You will not have access to Medicare until age 65, so if you retire before that, you will have to cover these expenses.

Anyone with poor health or who has a chronic illness is likely to have higher health bills, which can quickly eat away at retirement savings. That's not to say you can't retire early if you're not in top condition, but just know that health insurance can be more expensive than you think over the years leading up to Medicare eligibility. Even the healthiest retirees can end up paying hundreds of dollars a month in premiums and face sky-high deductibles, so if you expect to make many trips to the doctor or need expensive prescriptions, these costs can increase quickly.

Before you retire, find out how to pay for health care, and estimate the best you can how much it will cost. Medicare is also not completely free, so these costs will not disappear when you turn 65. But the better idea you have of what health care will cost during your early retirement years and the better you can budget for it.

3. You do not expect to rely on Social Security

Social Security benefits can help tremendously during retirement, but you are not eligible to start claiming before the age of 62, so if you plan to retire before then, you must for at least a few years without them.

Claiming benefits at 62 also means less checks than you would expect to claim until your full retirement age (FRA) – which for those approaching retirement is either 66, 66 plus a few months, or 67, depending on the year you were born. These cuts can also be significant; If your FRA is 67 and you have a claim of 62, your checks will be reduced by 30%. If these benefits will be a key in helping you afford an early retirement, demanding them early can throw a wrench into your plans.

Conversely, if you can live off of a solid pension fund past FRA, you can earn several benefits each month waiting to be claimed. For example, if your FRA is 67 and you require 70, you will receive an additional 24% each month on top of the full amount for the rest of your life – extra money that can go a long way.

Saving to a traditional retirement age is challenging enough; Retiring early requires even more hard work. But it can be done if you save a good deal every month, you have a plan to cover (potentially expensive) health care, and you can afford to wait a few years for Social Security benefits.

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