5 Bad Money Habits That Hold People Back From Retiring Early (2025)

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What does the American Dream look like to you? Perhaps it includes owning a nice house in a good neighborhood, traveling often and reaping the rewards of a career you love. About that last one: According to Pew Research, around four in 10 working adults say their job or career is extremely important to their identity, suggesting that a fulfilling profession isn’t only a pillar of the American Dream, but also an integral part of who we are.

But even the most awesome jobs typically will be left behind when it comes time to retire. And an emerging aspect of the modern American Dream is early retirement. A 2024 report by YouGov found that 59% of Americans want to retire before 65. And millions of Americans do retire early, but often not because they want to; they’re forced to due to job loss or health hurdles. But there are many Americans who make early retirement a goal and pull it off.

How can you retire early and comfortably? Let’s look at what you absolutely should not do. These are fivebad money habits that are proven to hold people back from early retirement.

Not Knowing Exactly What You’re Spending On

Here’s a super basic but incredibly important bad habit: not knowing exactly what you’re spending your money (and we mean every single dollar) on. It’s a common problem.

“Many people find it surprising to see where their money really goes,” said Austin Kilgore, analyst with the Achieve Center for Consumer Insights at Achieve.

People looking to retire will be smart to periodically track all expenditures, online and off, for a few weeks at a time to see exactly what’s going where. They also will incorporate into a budget, which really is just a spending plan to help you achieve goals you set and do the things you really want to.

Spending More Than You Earn

A little splurge here and there probably isn’t going to break the bank — unless these splurges are bigger or more frequent than you estimate and/or are being flung onto credit cards. Be mindful of your spending, as spending beyond your means will quash the possibility of a comfortable early retirement.

“Eventually this habit of spending more than you earn can snowball, leaving you with high-interest balances and little to no progress toward saving for your future,” said Christine M. Parisi, CFP, senior wealth advisor at R.W. Rogé & Company, Inc. “It’s a major obstacle to early retirement because you’re not just failing to save, you’re actually moving backwards by acquiring debt.”

Carrying High-Interest Debt

There are over 800 million credit cards in circulation in the U.S. And there are about 342 million people. It’s recommended to have a credit card to establish credit, but things have gotten totally out of control. Many of us who have credit cards fall into the sinkhole of carrying high-interest debt — and it only gets deeper over time.

“High-interest debt, such as credit card debt, can quickly erode your financial stability and hinder your ability to save for retirement,” said Jake Falcon, CRPC, CEO at Falcon Wealth Advisors. “Focus on paying off high-interest debt as quickly as possible and avoid accumulating new debt.”

Not Taking Full Advantage of Your Employer’s Retirement Plan

It’s critical to not only contribute generously to your retirement plan, but also to take full advantage of an employer’s 401(k) plan or 403(b) plan match.

“Skipping your employer’s matching contributions is essentially turning down free money,” Parisi said. “This match is part of your overall compensation, and not taking full advantage of it is a missed opportunity to accelerate your retirement savings with zero additional effort. Over the years, this can add up to tens or even hundreds of thousands of dollars in lost contributions and growth.”

Not Purchasing Appropriate Insurance (Life and Disability)

You may not want to think much about the fact that you need life insurance and you may not want to think at all about the fact that you also need disability insurance. Face these realities.

“It’s never easy to think about worst-case scenarios, but the financial consequences of a serious illness, injury or death can devastate your long-term plans and impact your family’s financial security,” Parisi said. “Without adequate insurance, you and your loved ones could lose income, fall behind on expenses and derail any progress you’ve made toward your future goals.”