Retired Early? Here’s What to Do Next

Reaching early retirement can feel like summiting a mountain. You’ve spent years saving diligently and chasing your target for financial independence. But once you finally stand at the peak, the view isn’t always what you imagined. Instead of clarity, many new retirees are struck by uncertainty about what comes next.

While much of your retirement planning may focus on accumulating wealth, transitioning into retirement also means carefully considering how you’ll live without a regular income and how you’ll spend your savings. In this article, we’ll outline five notable steps to guide you after hitting your early retirement goal.

1. Shift Your Mindset and Goals

Achieving early retirement requires sacrifice, dedication, and laser focus on your goal; however, it can also force you to think less about what comes next. Once you reach your FIRE number, you must shift your mindset from both working and saving to how you’ll spend your free time and money.

Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance at Heider College of Business, Creighton University, suggests retirees focus on activities that truly bring them happiness. He says, “We are all wired differently, and we all get happiness from different life experiences. My advice is that retirees should prioritize what provides them happiness,” and he further recommends allocating retirement budget to “those activities that provide us joy,” instead of spending on things that are “unimportant to us.”

Myles J. McHale, AIF^®, adjunct instructor at Cannon Financial Institute, advises against rushing through retirement goals. He explains, “Everything in moderation – complete one or two bucket list items after retirement but don’t try to jam 10 pounds of sugar in a 5 pound bag!” McHale adds that maintaining your and your partner’s health can lead to enjoyable, fulfilling experiences over many years.

In practice, post-retirement life could mean something different for everyone. For one person, it might be joining a country club and golfing daily. For another, it could be traveling the world, picking up a new hobby, or simply spending more time with family. Whatever way you choose to live your life, it’s important to define your goals clearly and determine how much money you’ll need to support them.

2. Build and Follow a Sustainable Drawdown Strategy

Early retirement signals a shift from building wealth to drawing down your assets in a way that reliably supports your lifestyle. Without a plan, it’s easy to overspend or underspend out of fear and deprive yourself of the life you’ve worked hard to achieve. A systematic drawdown strategy provides the structure you need to sustain your income and live confidently.

Johnson emphasizes that this stage can be surprisingly difficult. “Ironically, many people have more trouble managing their finances during the decumulation stage of their lives than during the accumulation stage,” he explains. Creating a framework, therefore, is especially critical for this phase.

Common approaches include following a set withdrawal rate, such as the 4% rule, which involves drawing a set percentage from your portfolio each year, or adopting a bucket strategy. With the bucket method, you separate your savings into short-term cash for near-term expenses, intermediate investments for the next five to ten years, and long-term growth assets for later decades. This can help you balance stability with growth, while protecting against risks like market volatility and inflation.

Whichever strategy you choose, carefully tapping into your assets can reduce anxiety and make your income more predictable. Instead of second-guessing every expense, you can spend and live the life you want with confidence. If you’re unsure of where to turn, we recommend consulting with a financial advisor to find the ideal strategy for you.

3. Avoid Crucial Income Mistakes

Even with an income strategy in place, early retirement can present unique challenges to overcome. Unlike traditional retirees, you may need your portfolio to last 40 years or more, leaving little margin for error. Overspending too quickly, drawing from the wrong accounts in the wrong order, or failing to account for taxes can erode decades of careful saving.

Here are mistakes to avoid after retiring early:

Not Keeping Enough Cash

One major error, according to Nancy D. Butler, CFP^®, CDFA^®, CLTC^®, CSA^®, international professional speaker, award-winning author, and business coach, is failing to keep a “sufficient cash reserve” to pay for unexpected expenses. “First, set aside an appropriate amount as a cash reserve. Keep in mind that a cash reserve isn’t any good unless you have money added to it on a regular basis, so when you need to use all or a portion of your cash reserve, you are constantly replenishing it,” she explains.

Overlooking RMDs

Another issue is not planning for required minimum distributions (RMDs). These require you to withdraw from your tax-deferred retirement accounts, such as a traditional IRA or 401(k), by the age of 73. While potentially a long way off if you retire early, overlooking these can force you into a higher tax bracket than you’re currently in and increase what you must pay.

“Start planning required minimum distributions from qualified plan assets several years in advance. By evaluating this early, you can better manage tax ramifications and keep from having to sell an asset when the market is down,” says Butler.

Sequence-of-Returns Risk

Finally, not accounting for sequence-of-returns risk can be damaging to your portfolio. This risk occurs when market downturns happen early in retirement, which can lock in unrecoverable losses if you’re withdrawing at the same time. It’s crucial to plan for flexibility, such as reducing withdrawals during down markets or, as Butler mentions, maintaining a cash reserve to cover consistent and unexpected expenses.

4. Bridge Important Retirement Gaps

Retiring early gives you the freedom to live life on your terms, but it also leaves you responsible for covering financial gaps that traditional retirees may not face for years. Overlooking these can create unexpected costs and undermine your independence. The three biggest gaps to plan for are healthcare, Social Security, and access to tax-advantaged accounts.

When you retire before the age of 65, you won’t have access to Medicare. For this reason, you must budget for private insurance through the Affordable Care Act (ACA), your state’s marketplace, or pay for it via your Health Savings Account (HSA). Alternatively, you can jump on your spouse’s health plan if they’re still employed.

You also won’t be able to receive Social Security payments until at least age 62 (you may wait longer to maximize income), causing a gap in additional income. If you’ve saved enough to fund a comfortable lifestyle, this shouldn’t cause much of an issue. However, it’s important to be aware of it because you’ll be living off of your portfolio or other income sources until you’re eligible.

Finally, you may have the bulk of your wealth tied up in retirement accounts like a 401(k) or IRA, which typically penalize withdrawals before age 59½. To bridge this gap, you may need to rely on taxable brokerage accounts or the Rule of 55 exception if you left work later in your 50s. Structuring your withdrawals smartly can help minimize penalties and taxes.

5. Stay Flexible and Revisit Your Plan Often

Early retirement is a significant achievement. However, it also doesn’t mean you stop financial planning or regularly reviewing your goals. As your life after your career evolves, you’ll need to stay on top of any changes and adjust your plan accordingly.

“Proactive planning and working with a seasoned advisor can be instrumental in shifting a client’s behavioral biases and risk perceptions into real retirement income decisions and outcomes,” says McHale. With more nuanced challenges to manage, such as strategic withdrawals and healthcare, meeting with an experienced professional can help you move forward confidently and avoid crucial mistakes.

Flexibility after you retire is also key. Life can change quickly and become much different than you envisioned while you were working toward your goal. For instance, you may have children or grandchildren, decide to move to a new city, or develop new passions that change how you spend both your time and money. Whatever happens, be ready by regularly being on top of your plan and, if necessary, working with a financial advisor.