Are You Considering Retiring Before 65? Here’s What Nobody Tells You
When I decided to research and write this article, I started by examining my own life — particularly the lives of friends and family members who have already ventured into retirement. And one of the most obvious questions that kept popping up, over and over again, is the fact that most retirement calculators typically ignore a simple but crucial reality, which is that practically the entire U.S. retirement system was built around the assumption that you’ll keep working until at least 65. Medicare kicks in at 65. Full Social Security benefits land between 66 and 67 for most people. Pension plans, the few that still exist, typically vest fully right around that same window.
So when you decide to retire early, you’re not just making a lifestyle choice. You’re stepping outside the default system entirely. And the moment you do that, the math changes in ways that can genuinely blindside people who haven’t thought it through.
I’m not saying don’t do it. Early retirement can be one of the most liberating decisions a person makes. But I’ve watched too many people sprint past the finish line without understanding what the race looks like on the other side. So let’s get into the real numbers — the kind that rarely appear in the glossy retirement guides.
THE TWO FINANCIAL SHOCKS NOBODY PREPARES FOR
The first is Social Security. If you retire at 62 and start drawing benefits immediately, your monthly check could be 25 to 30 percent lower than if you’d waited until your full retirement age. That reduction is permanent. It doesn’t reset when you turn 67. You’ve locked in a lower payout for the rest of your life — which over a 20 or 25-year retirement translates to a staggering sum of foregone income that most people never bother to calculate until it’s too late.
The second shock is healthcare. Before 65, you’re on your own. Medicare doesn’t exist for you yet. That means COBRA, the ACA marketplace, a spouse’s employer plan if you’re fortunate, or going without — which is a gamble that tends to end badly and expensively. In moderate-cost states, a healthy 58-year-old can expect to pay between $8,000 and $11,000 a year in premiums alone. In California or New York, that climbs toward $15,000. Add any chronic condition and tack on another 20 to 30 percent.
Healthcare isn’t just the biggest cost of early retirement. It’s the most common reason early retirement fails.
YOUR HOUSING SITUATION IS THE FOUNDATION OF EVERYTHING
Before you can calculate what you need to retire, you need to pin down one thing above all others: what your housing actually costs — and whether that number is stable.
If you own your home outright, you’ve handed yourself one of the most powerful advantages in early retirement. Your monthly housing burden could sit between $700 and $1,200, covering property taxes, insurance, and maintenance. That predictability has real financial value. You’re not exposed to rising rents. You’re not at a landlord’s mercy.
The catch is that ownership ties you down, and the hidden costs surprise people. Property taxes vary wildly by state. Home insurance in coastal markets — Florida, Louisiana, parts of Texas — has become genuinely brutal as insurers reprice climate risk. And older homes have maintenance appetites that only grow.
Renting gives you flexibility and zero maintenance drama. The trade-off is exposure to rent increases you can’t control, and in hot markets those increases have been anything but modest. In a competitive rental market you could be looking at $1,500 to $2,500 a month with no ceiling in sight.
The short answer: if your mortgage is paid off, ownership almost always wins on cost. If you still carry a large balance, renting may actually be more predictable. And if you’re planning to try different locations — which more early retirees are doing — renting buys you optionality that ownership doesn’t.
ALL 50 STATES: WHAT EARLY RETIREMENT ACTUALLY COSTS
This is the section most retirement articles never write — and it’s the most useful thing I can give you. A $600,000 nest egg in Mississippi is not the same as $600,000 in California. The gap between America’s cheapest and most expensive states is wide enough to determine whether your retirement is comfortable or chronically stressed.
The figures below represent estimated total nest egg requirements to fund early retirement from roughly age 55 to 65 — before Medicare and full Social Security stabilize the picture. They factor in housing, food, transportation, healthcare, and taxes at a modest but comfortable lifestyle. Use them as a starting framework, then go deeper on the states that interest you.
HIGH COST STATES — $650,000 to $960,000+
Hawaii: $900,000–$960,000. Nearly everything is imported, pushing grocery costs 30 to 40 percent above the mainland average. Stunning to live in. Expensive in ways that compound quietly.
California: $850,000–$950,000. State income tax up to 13.3%. Healthcare premiums among the highest nationally. The weather is exceptional. The price tag is real.
New York: $800,000–$880,000. State and city taxes are punishing near New York City. Upstate is considerably more affordable but property taxes remain among the highest nationally even in rural counties.
Massachusetts: $780,000–$850,000. Boston rivals New York on living costs. A flat 5% income tax sounds modest until you stack it against everything else.
New Jersey: $760,000–$840,000. The highest property taxes in the nation. That sentence alone should recalibrate any calculation involving New Jersey.
Connecticut: $740,000–$820,000. High income taxes, high property taxes, and Social Security benefits are taxable at the state level.
Washington: $700,000–$780,000. No state income tax is a genuine win. But Seattle’s cost of living pushes overall retirement costs firmly into expensive territory.
Oregon: $680,000–$760,000. State income tax up to 9.9% and a hot real estate market around Portland make Oregon pricier than its reputation suggests.
Colorado: $670,000–$740,000. Denver’s housing market has transformed over the past decade. Colorado taxes Social Security benefits — worth factoring in if you plan to draw early.
Alaska: $660,000–$730,000. No state income tax and the Permanent Fund Dividend are genuine advantages. Remote area costs and heating bills push totals higher than the tax picture alone implies.
UPPER MIDDLE STATES — $560,000 to $660,000
Maryland: $640,000–$700,000. D.C. proximity drives costs in metro counties. State income tax applies.
Virginia: $620,000–$680,000. Northern Virginia is effectively a D.C. suburb priced accordingly. The Shenandoah Valley and southwestern regions are meaningfully more affordable.
Illinois: $610,000–$670,000. A 4.95% flat income tax and high property taxes in many counties. One significant upside: Illinois does not tax retirement income of any kind.
Minnesota: $600,000–$660,000. High state income taxes and cold winters that drive energy costs. Social Security is taxable for higher earners.
Rhode Island: $590,000–$650,000. Small state, elevated costs across the board. Social Security taxable at state level.
New Hampshire: $580,000–$640,000. No income tax on wages and no sales tax. But property taxes are among the highest in the country — that’s how services get funded.
Vermont: $580,000–$640,000. Taxes Social Security benefits and carries meaningful income taxes. Beautiful state with a financial profile to match its real estate prices.
Maine: $575,000–$635,000. More affordable than southern New England but not dramatically so. Income tax runs to 7.15% at the upper end.
Delaware: $570,000–$630,000. No sales tax, no Social Security tax. Healthcare and housing are moderate. Genuinely underrated as a retirement destination.
Pennsylvania: $565,000–$625,000. Does not tax retirement income of any kind — not Social Security, pensions, or 401(k) withdrawals. A significant structural advantage for early retirees with investment income.
MIDDLE TIER STATES — $490,000 to $560,000
Florida: $540,000–$610,000. No state income tax. But home insurance costs in coastal counties have doubled or tripled in recent years. Desirable areas have seen meaningful housing price appreciation.
Arizona: $530,000–$590,000. Reasonably priced healthcare and a favorable tax structure. Summers are extreme — triple digits for months — which affects utility costs and quality of life in ways worth considering.
North Carolina: $520,000–$580,000. A flat 4.75% income tax trending lower with ongoing legislative changes. The Research Triangle and Asheville have appreciated; much of the state remains affordable.
Texas: $520,000–$580,000. No state income tax, but property taxes of 1.8 to 2.2% of assessed value annually catch people off guard. Healthcare is moderate. Summers are brutal across most of the state.
Georgia: $520,000–$575,000. The first $65,000 of retirement income per person is exempt from state taxes. Atlanta inflates the average; outside the city Georgia is genuinely affordable.
Nevada: $525,000–$585,000. No state income tax. Las Vegas is more affordable for day-to-day living than people expect. Reno draws increasing numbers of California retirees seeking cost relief.
South Carolina: $515,000–$570,000. Significant retirement income deductions available. Coastal areas are pricier; the inland Upstate region is considerably more affordable.
Tennessee: $510,000–$565,000. No state income tax. Nashville has gotten expensive. Knoxville, Chattanooga, and much of rural Tennessee remain very affordable.
Idaho: $510,000–$565,000. Boise has appreciated significantly. State income tax runs to 5.8%. Outside the Treasure Valley, Idaho is still very affordable and remarkably scenic.
Utah: $515,000–$570,000. Taxes Social Security benefits. Salt Lake City has grown in cost considerably. Healthcare is relatively moderate and the outdoor quality of life is frequently cited among the best in the country.
Montana: $510,000–$565,000. Bozeman and Missoula have seen significant price increases. Rural Montana remains affordable. No sales tax is a genuine daily benefit.
Wisconsin: $510,000–$560,000. Taxes retirement income including Social Security. Property taxes moderate to high by county. Winters are serious.
Michigan: $505,000–$555,000. Detroit suburbs are very affordable. Ann Arbor runs higher. Retirement income taxation rules in Michigan depend on birth year — worth checking specifically against your situation.
Ohio: $500,000–$550,000. Consistently affordable with genuine urban amenities in Columbus, Cleveland, and Cincinnati. Modest retirement income tax rates.
Wyoming: $495,000–$545,000. No state income tax and low property taxes. Jackson Hole is wildly expensive; the rest of the state is not. Rural healthcare access can be limited.
Indiana: $495,000–$545,000. Flat income tax of 3.15% — one of the lowest nationally. Very affordable outside Indianapolis. Social Security exempt from state income tax.
Missouri: $495,000–$545,000. St. Louis and Kansas City offer urban living at prices that would be laughable in coastal markets. Social Security partially taxable but with income thresholds that protect most retirees.
Iowa: $495,000–$545,000. Recently moved to a flat 3.9% income tax and is phasing in full retirement income exemption by 2026. More attractive than it was just a few years ago.
Kansas: $490,000–$540,000. Affordable across the board. Social Security partially taxable for higher earners. Property taxes moderate.
Nebraska: $490,000–$540,000. Omaha is an underrated city for early retirees — affordable housing, solid healthcare infrastructure. Nebraska taxes Social Security, which works against it.
New Mexico: $490,000–$540,000. Albuquerque and Santa Fe are affordable relative to comparable cities. Recent legislation has moved toward exempting most retirees from Social Security taxation — confirm current rules before planning around it.
AFFORDABLE STATES — $420,000 to $490,000
North Dakota: $480,000–$530,000. Very low income tax rates trending lower. Bismarck and Fargo are affordable. Winters are severe and rural healthcare access is limited.
South Dakota: $475,000–$525,000. No state income tax. Low cost of living. Sioux Falls has grown into a legitimate mid-size city with real amenities.
Kentucky: $470,000–$520,000. Flat income tax of 4.5% with a retirement income exemption. Louisville and Lexington are very affordable. Healthcare costs are moderate.
Louisiana: $465,000–$515,000. Affordable broadly, but property insurance in coastal parishes has surged dramatically following repeated hurricane seasons. Does not tax Social Security income.
Oklahoma: $455,000–$510,000. Oklahoma City and Tulsa are both genuinely affordable. Below-average healthcare costs. Tornado risk affects insurance premiums in affected areas.
Alabama: $445,000–$500,000. One of the most tax-friendly states for retirees in the country. Social Security exempt. Most pension income exempt. Effective tax rates for retirees tend to be very low. Birmingham and Huntsville offer solid urban amenities at remarkably low cost.
West Virginia: $445,000–$500,000. Very low cost of living and recently reduced income taxes significantly. Healthcare access outside Charleston and Morgantown can be limited — a real consideration, not a footnote.
Arkansas: $435,000–$490,000. Northwest Arkansas has grown considerably around Bentonville. The rest of the state is very affordable. Does not tax Social Security and exempts a portion of retirement income.
Mississippi: $420,000–$480,000. The most affordable state in the country by most measures. Exempts all retirement income from state taxes — Social Security, pensions, 401(k)s, IRAs. The trade-offs are real: healthcare infrastructure is limited outside urban centers and broader socioeconomic factors affect quality of life in ways the numbers alone don’t capture. But if the math needs to work, Mississippi makes it work.
TAXES: THE COST THAT QUIETLY COMPOUNDS
Over a 20-year retirement, the difference between a no-income-tax state and a high-income-tax state can reach six figures. Nine states have no income tax at all: Florida, Texas, Nevada, Tennessee, South Dakota, Wyoming, Washington, Alaska, and New Hampshire. Every traditional IRA or 401(k) withdrawal is taxable federally regardless of where you live — adding state tax on top of that is an avoidable cost if you plan your location deliberately.
And the Social Security trap catches more people than it should. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia all tax Social Security benefits to some degree. If you’re already drawing at a permanently reduced rate at 62, living in one of these states means you’re getting hit twice. That belongs in your planning before you commit to a location — not after.
THE INTERNATIONAL OPTION IS MORE VIABLE THAN YOU THINK
A growing number of Americans are running a calculation the mainstream financial media rarely discusses: retiring abroad. Costa Rica costs $25,000 to $35,000 per year for a comfortable lifestyle. Mexico runs similar figures. Portugal — increasingly popular with good reason — lands between $30,000 and $40,000. Jamaica sits between $22,000 and $32,000, with private health insurance available for $800 to $1,500 annually. Compare that to $8,000 to $15,000 in ACA premiums stateside and the financial logic becomes hard to argue with.
If your retirement math isn’t working at home, the problem may not be that you haven’t saved enough. The problem may be where you’re planning to spend the money.
SHOULD YOU RETIRE BEFORE 65?
Early retirement is achievable. The people who do it well aren’t necessarily those with the largest portfolios. They’re the ones who understood their actual costs, chose their location deliberately, planned around the healthcare gap, and had a clear sense of what they were retiring toward — not just what they were leaving behind.
Run the real numbers. Factor in your state, your housing situation, what healthcare will cost before Medicare arrives, and what Social Security looks like if you draw early versus waiting. Understand your tax exposure. Take the qualitative questions — purpose, community, identity — as seriously as the financial ones.
The gap between a poorly planned early retirement and a well-planned one isn’t willpower or luck. It’s information. If you live a very lean life, those numbers might very well don’t apply to you. Healthcare is perhaps the single most unpredictable factor and one that must be analyzed carefully.
Share this article with anyone you know and remember, retirement planning should start the moment that very first paycheck hits. That means as early as possible and not in your senior years.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Consult with a qualified financial advisor or tax professional before making any decisions about your investments or retirement accounts.
— Code Red Financial
Jay Sadio, MBA
