The dream of early retirement — often called FIRE (Financial Independence, Retire Early) — is more popular than ever. But while the goal is simple, the path can be full of pitfalls. Many people chase FIRE without realizing how easily small missteps can derail long-term security. Here are the biggest early retirement mistakes and how to fix them.
1. Underestimating Future Expenses
Many aspiring early retirees assume they can live on less than they really can.
Fix: Track your spending carefully for at least a year before you estimate your FIRE target.
2. Ignoring Inflation
A dollar today won’t have the same power 20 years from now.
Fix: Factor 2–3% annual inflation into your retirement spending plan.
3. Relying Too Heavily on Stock Market Returns
Markets fluctuate, and early retirees are more exposed to downturns.
Fix: Keep a mix of growth investments and safe assets to cushion volatility.
4. Forgetting About Healthcare Costs
Many people overlook the cost of insurance before Medicare eligibility.
Fix: Research healthcare options early and budget more than you think you’ll need.
5. Starting Too Late
Waiting until your 40s or 50s to begin saving makes the math much harder.
Fix: Start now — even small, consistent investments compound dramatically over time.
6. Living Too Frugally Too Soon
Extreme cutting can lead to burnout and resentment.
Fix: Find balance. Aim for sustainability, not deprivation.
7. Not Accounting for Taxes in Retirement
Withdrawals from 401(k)s and IRAs are taxed, and that can surprise early retirees.
Fix: Diversify between tax-deferred, tax-free, and taxable accounts.
8. Forgetting About Required Minimum Distributions (RMDs)
Even FIRE followers must eventually take RMDs from certain accounts.
Fix: Plan to convert some funds to Roth accounts before RMDs begin.
9. Overlooking Sequence of Returns Risk
A market crash early in retirement can drain your portfolio faster than expected.
Fix: Keep 3–5 years of cash or bonds to avoid selling during downturns.
10. Ignoring Social Security Strategies
Many early retirees think Social Security won’t matter — but it can be a helpful safety net.
Fix: Review your benefits and decide on an optimal claiming age.
11. Not Rehearsing Retirement
Quitting cold turkey can be a shock — both financially and emotionally.
Fix: Try a “test run” year where you live on your planned retirement budget.
12. Underestimating Lifestyle Changes
Some people find they’re bored or miss structure after retiring early.
Fix: Plan what you’ll retire to, not just what you’ll retire from.
13. Forgetting About Long-Term Care
Ignoring future care costs can devastate savings later in life.
Fix: Explore long-term care insurance or plan for potential assistance needs.
14. Being Too Conservative Too Early
Keeping too much in cash or bonds can cause your money to lose purchasing power.
Fix: Keep enough growth assets to outpace inflation throughout retirement.
15. Not Revisiting the Plan Regularly
A FIRE plan isn’t one-and-done — life changes, and so should your plan.
Fix: Revisit your goals and assumptions every year.
Key Takeaway
Reaching early retirement is less about luck and more about awareness. By avoiding these 15 common mistakes, you can turn your FIRE dream into a sustainable, rewarding reality.