Things to Know Before You Retire at 62

Learn About Collecting Social Security, Medicare, and More

Get a plan in place and you can retire at 62.
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If you're aiming to retire at 62, you aren't alone, since 63 is the average retirement age in the U.S. Before you turn in your resignation though, be sure you're aware of the following three things.

1. You Can Delay Social Security

Many retirees say they fear running out of money. Protect your future income by making a smart decision about when to begin your Social Security. Social Security provides inflation-adjusted income for as long as you live.

Just because you retire at 62, it does not mean you have to start collecting Social Security at 62. You will get a larger benefit by waiting to collect until you are older and using strategies for married couples to get more out of their joint benefits than they would get if they each make their claiming decisions independently.

As a matter of fact, married couples who make strategic choices about how and when to collect benefits may receive many thousands more in benefits over their joint lifetimes than those who collect early with no analysis. You can use a Social Security calculator to see the difference between a good claiming decision and a poor one.

So if you delay collecting Social Security, how do you retire? Many retirees should consider using their own savings to cover their retirement expenses while delaying the start date of their Social Security. This can lock in a higher guaranteed social security income amount later, and help protect you from outliving your money.

2. Medicare Doesn't Kick in Until 65

Medicare benefits don’t start until you turn 65. If you retire at 62 you’ll need to make sure you can afford adequate health insurance coverage until age 65 when your Medicare benefits begin.

With the Affordable Care Act, you are guaranteed to get coverage even if you have pre-existing conditions, and you can't be charged more than someone healthier. But pricing can vary by location and many upcoming retirees whose employers paid for their insurance get caught off guard by how expensive health insurance coverage can be.

Also, keep in mind, Medicare does not cover all health care costs, so many people purchase additional health coverage to supplement their Medicare benefits. Get quotes on your health insurance costs so you can build this expense into your retirement budget.

3. Consolidate Retirement Accounts

If you have money in IRAs, 401(k)s or other employer-sponsored plans, think about consolidating these plans into one account. Many people believe their money is safer when they spread it out across many different firms.

Instead, when you use a large well-known financial custodian you can build a well-diversified portfolio by owning numerous types of investments all held within a single account. The underlying assets belong to you. They are not assets of the financial firm. This means you gain very little added safety by having accounts spread out across numerous financial institutions.

Another reason to consolidate is at age 70 1/2 tax rules require you to start taking distributions from your retirement accounts. You'll find it much easier to follow these rules when your retirement accounts have been consolidated.

Also keep in mind, although you don’t have to take money out of your IRA or other retirement accounts until age 70 ½, for some folks it may make sense to start taking withdrawals if you need them before you are required to do so because of your age. It depends on your marginal tax bracket and your other sources of income.

To figure out if this makes sense for you, you may wish to work with a retirement planner that specializes in helping people decide on the most tax-efficient way to use their retirement money.