Dave Ramsey Tells Us the Biggest Retirement Mistake You Can Make

Editor's note: This article is part of an ongoing series in which we ask influential personal finance figures to share their opinion on the biggest retirement mistake you can make. Other articles feature Suze Orman and Grant Cardone.

Sixty-two seems like the perfect age to retire. After all, you can start collecting Social Security. Plus, you're still young enough to enjoy it.

It's no wonder 62 is the average age of retirement in America. But retiring at that age or earlier could be one of the biggest mistakes a person can make.

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At least according to retirement expert, author and podcaster Dave Ramsey.

“People underestimate how long they’ll live and how much money they’ll need,” Ramsey tells Kiplinger.com. “They retire broke or way too early. It's like jumping out of a plane without checking your parachute.”

This applies to the millions of people who choose to retire early, not the ones who are forced out of their jobs because of an illness, disability, workforce reduction, or a sick family member they have to care for.

Been There, Done That
Ramsey has seen it before. For over twenty years, the author, founder and CEO of Ramsey Solutions and host of “The Ramsey Show,” has helped millions of people get out of debt, take charge of their financial lives and achieve their retirement goals.

He speaks from experience. After running up thousands of dollars in debt and being forced to declare bankruptcy at age 26, Ramsey not only climbed out of the financial hole he created but went on to build a career teaching others how to achieve financial freedom.

The knock on retiring early

Retiring early is the dream of millions of Americans, regardless of whether that means exiting the workforce in their 50s or early 60s. While there are advantages to early retirement, there are also some clear disadvantages that make Ramsey staunchly against it.

For starters, if you retire before Medicare kicks in at 65, you will have to fund your own health care, which can get expensive. Plus, if you don’t plan to work at least part-time, you’ll have to figure out how to grow your savings and generate cash flow. With so many years without a steady income, there is a chance you could run out of money. If you retire at 62 and collect Social Security, be willing to take up to a 30% reduction in benefits for your lifetime.

All of this may be fine if you’ve saved enough for retirement and you're flush with cash. But if you rely on Social Security to supplement your monthly income, a reduction in your benefits because you retired early could impact your quality of life. Additionally, retiring early means less money saved, plus more years you have to draw from your savings.

“Don’t retire until you’re truly ready,” says Ramsey. “That means zero debt, a fully funded nest egg, and a clear monthly budget. Work longer if you need to, and budget like your future depends on it — because it does.”

Retire debt-free

Retiring with debt is another one of the biggest retirement mistakes Ramsey encounters. People think they can handle the monthly mortgage payment and/or car payment, but one unexpected illness or accident, and all of a sudden, they are in over their heads.

That’s why Ramsey says people should be entirely debt-free in retirement, including paying off their mortgage, regardless of a low interest rate. When you owe money, you can’t achieve financial freedom and security in retirement.

"They hang onto debt. Especially mortgages and car payments. Then they assume they’ll just ‘manage it’ in retirement,” says Ramsey. “The fix is simple. Attack that debt with intensity now, before you step into your golden years.”

It’s never too late to fix your retirement mistakes

Retirement isn’t the end of the road. If you make mistakes, such as retiring too early or with too little money, you have options to fix them. You can go back to work, downsize or reduce your budget.

If you haven’t retired yet, you can put in the work now to prepare for it or delay retiring to get yourself in a better position later.

"It’s never too late to start doing the right thing,” says Ramsey. “You may not have 40 years left, but you’ve got today. And that’s enough to start turning the ship around.”

Donna Fuscaldo is the retirement writer at Kiplinger.com. A writer and editor focused on retirement savings, planning, travel and lifestyle, Donna brings over two decades of experience working with publications including AARP, The Wall Street Journal, Forbes, Investopedia and HerMoney.