2. Have a plan to cover healthcare costs
If you don't have a plan to cover healthcare costs, they could quickly drain your retirement fund. You won't be eligible to enroll in Medicare until you turn 65, so if you retire before that, you'll need another form of health insurance.
One option is to enroll in COBRA coverage, which will allow you to stay on your former employer's insurance plan even after you leave your job. However, COBRA insurance can be incredibly expensive and it doesn't last forever.
When you're enrolled in insurance as an employee, your employer covers the bulk of the annual costs. The average annual premium for family health insurance coverage in 2019 is roughly $20,000, according to a recent report from the Kaiser Family Foundation. Of that amount, employees only paid around $6,000 per year in premiums -- the rest was covered by the employer.
With COBRA insurance, though, your employer won't chip in to help pay for coverage. You're also only able to stay on COBRA insurance for up to 18 months, so if you retire before age 63 1/2, you'll need to find another form of insurance before you can enroll in Medicare.
Another option is to buy insurance through the Affordable Care Act marketplace, although plans may be expensive. You can find plans with lower premiums, but you'll typically face higher deductibles and out-of-pocket maximums. If you have health issues and visit the doctor regularly, those costs can quickly add up.
Before you choose to retire early, make sure you've budgeted for health insurance. One way to do that is to invest in a health savings account (HSA). You have to be enrolled in a high-deductible healthcare plan to be eligible (meaning your deductible is at least $1,350 for individuals or $2,700 for families), but you can invest tax-deductible dollars, let your money grow over time, and then withdraw the money tax-free as long as it goes toward eligible medical expenses.
The third step to prepare for early retirement is discussed here.