Market performance tends to dominate the conversation about risks to a retirement plan. But spending shocks can also curb a retirement portfolio’s longevity. In Morningstar’s research, we examined the implications of two major types of spending shocks: unanticipated early retirement and uninsured long-term care expenses at the end of life. The former may necessitate spending over a longer period, often with higher healthcare costs in the pre-Medicare years, while the latter can translate into an effective “balloon payment” toward the end of life.

EARLY RETIREMENT

Early retirement — before the standard age of 65 — is an increasingly common scenario. While Social Security’s full retirement age is currently between 66 and 67, the average retirement age is 62, according to a study from MassMutual. That’s corroborated by Social Security filing data, which show that roughly 25% of retirees take Social Security when it’s first available at age 62, and 15% file at 63 or 64. Nearly half of the retirees surveyed by MassMutual said they had retired earlier than planned; commonly cited reasons included layoffs, being able to retire sooner than expected, or illness or injury.

Early retirement has significant implications for retirement spending, with longer drawdown periods necessitating lower spending to maintain a high likelihood of not running out later on. In our base-case spending simulation, expanding the drawdown period from 30 to 35 years reduces the starting safe withdrawal rate from 3.9% to 3.5%. Stretching the time spending horizon to 40 years takes the starting safe withdrawal rate to 3.2%.

Keeping withdrawals low in early retirement may be challenging on a few levels, however. First, individuals aren’t eligible for Medicare coverage until age 65, so bridging healthcare coverage in the intervening years has the potential to increase spending. Insurance coverage for 62- to 65-year-olds from the ACA marketplace averaged between $800 and $1,200 a month in 2025, according to data from Boldin. Meanwhile, Cobra coverage (extending workplace-provided coverage) for people 62 to 65 averaged $700 to $1,500 a month. For a62-year-old taking a safe withdrawal rate of 3.5% ($35,000) from her $1 million portfolio, healthcare costs would consume roughly a third of those withdrawals.

Further complicating matters for young retirees is that many individuals wish to delay Social Security to increase their eventual benefits. At the same time, delaying Social Security can necessitate higher withdrawals in the early part of retirement, thereby imperiling the portfolio’s ability to last over the longer time horizon.