How to Retire Early Due to Disability or Caretaking

Portrait of an elderly mother and middle-aged daughter smiling together.

(Image credit: Getty Images)

published 1 February 2025

Editor’s note: "How to Retire Early Due to Disability or Caretaking" is part of a series focused on how to retire early and the FIRE (Financial Independence, Retire Early) movement. To see all early retirement articles, jump to the end.

Early retirement may seem like a fortunate break, but for many, it’s far from a choice. Often, it’s a decision made by circumstances, not desire. Surprisingly, more than half of Americans (58%) retire earlier than planned, according to a report from the Transamerica Center for Retirement Studies.

While company restructures and mass layoffs often grab headlines, health-related issues and caregiving responsibilities are also leading factors. In fact, health concerns are the biggest driver — 46% of early retirees cite personal health problems as the reason for cutting their working years short. Caregiving responsibilities, often falling disproportionately on women, account for another 20%. Most alarmingly, only 21% of those who retire early report being financially stable.

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An unplanned early retirement can be a shock, but it doesn’t have to mean settling for a less-than-ideal retirement. As CFP Board Ambassador LeTian Dong explains, “In the event of an unplanned early retirement, it’s important to take proactive steps to secure your financial and emotional well-being.”

Do you really have to retire early?

Before you retire early, explore ways of holding onto your job.

Disability doesn't have to force an early retirement ; you do not have to tell your boss about your disability. If you work primarily on a computer, you could ask to work remotely full-time or a few days a week. You may ask for accommodations at work if you believe they will help you stay on the job. For example, if you have long COVID, you may lobby for rest breaks, telework and an adaptable schedule, all of which can help with brain fog and exhaustion. About half of workers who ask for accommodations are granted them.

Caregiving often interferes with a full-time job, but you may be able to manage. According to the Institute on Aging, you could try talking to your employer, finding ways to delegate caregiving responsibilities, and building in self-care.

If you cannot keep your job, here are six steps to take an unplanned early retirement.

1. Get a grip on your finances

Dealing with an unexpected retirement while managing health issues or caregiving responsibilities can feel overwhelming. However, Julie Bates, CFP Board Ambassador and CFP® at Delta Community Credit Union, encourages people to view this as “an opportunity to reset your priorities with dignity and purpose.”

She says to start by assessing your financial situation: list your savings, expenses and any benefits available to you, such as unemployment insurance, disability insurance, or paid leave.

If retiring early due to a disability, Patrick Cummins, CFP® and financial adviser at Advance Capital Management, suggests exploring government social services designed to help in these situations.

For instance, Social Security Disability Insurance (SSDI) can be a lifeline. It provides income to those who can no longer work due to a disability, but qualifying can be challenging. You need to have sufficient work credits and a disability that is expected to last at least a year or result in death. The application process is rigorous, so gathering detailed medical documentation is essential.

Some employers offer disability insurance as part of their benefits package. Check with your HR department to see if you’re eligible for short- or long-term disability coverage. Also, ask whether your employer offers early retirement benefits, such as severance packages, pension payouts or health insurance extensions.

The Family and Medical Leave Act (FMLA) may also be a godsend if illness or caregiving responsibilities force you to leave work. FMLA provides up to 12 weeks of unpaid leave, allowing you to maintain your job and benefits temporarily. Some states and the District of Columbia also offer paid family leave, which can provide income during this time. For more information, see our article on what the FMLA provides.

2. Rework your budget for your new reality

Once you have a clear picture of your financial situation, evaluate your ability to maintain your current lifestyle. You may need to make temporary or long-term adjustments to your spending.

Dong advises, “Prioritize essential expenses and identify areas to cut back if needed.”

Consider canceling unnecessary subscriptions or memberships, switching to cheaper phone or cable plans, and delaying major purchases, such as a new car. These small changes can free up cash for essential expenses.

Bates adds, “Some adjustments are temporary, like cutting discretionary spending, but others, like downsizing your home, may be permanent. Group your decisions accordingly to get in the right mindset.”

3. Generate new income

Further, you’ll need to explore sources of income to cover both immediate and long-term needs.

For immediate cash, look to your emergency fund. Ideally, you’ll have three to six months’ worth of expenses saved for unexpected hardships. If that’s not enough, you may need to access your retirement accounts.

Cummins emphasizes the importance of understanding the flexibility of your retirement funds. “It’s crucial to focus on what you can access and what you cannot,” he says.

The IRS imposes penalties for early withdrawals, but there are exceptions. For instance, the Rule of 55 allows you to withdraw from your 401(k) penalty-free if you leave your job in or after the year you turn 55. There are also exceptions for medical expenses and other hardships. Research your options carefully to avoid unnecessary penalties.

Social Security benefits can also be an option if you are at least age 62. Bates points out that “while delaying benefits increases your payout, you may need to start receiving them earlier if income is urgently needed.”

4. Keep your health care covered

Health care is a significant concern for early retirees, Bates says, especially if you’re not yet eligible for Medicare, which begins at age 65. If you lose employer-sponsored coverage, explore COBRA, the Health Care Exchange or a spouse’s plan.

COBRA allows you to extend your employer’s coverage for up to 18 months, but it can be costly. Alternatively, purchasing a plan from the health care marketplace may offer more affordable options based on your income. Joining a spouse’s plan, if available, is often the simplest and most cost-effective solution.

5. Get help from a pro

While it may seem counterintuitive to spend money during a financial crunch, working with a financial adviser can pay off. “Navigating your expenses and any stop-gap measures should be evaluated with a financial advisor,” Cummins says.

Bates agrees, explaining that a professional “can help you align your current priorities and resources with your long-term goals, ensuring you make confident, informed decisions during this transition.”

6. Plan for your life beyond work

Retirement isn’t all about money. Whatever your reason for retiring, it’s essential to still work on your overall well-being and future.

“On a personal level, focus on building a support network, maintaining your health and finding purpose through hobbies, volunteering or part-time work,” Dong advises. These activities can provide structure, meaning and even supplemental income.

Bates adds, “Sometimes, you can pivot your career by using your skills for part-time work, freelancing or consulting.”

Even in the best circumstances, early retirement can lead to a loss of identity and purpose. So, take time to think about the activities and goals that will fill your days and bring you fulfillment.