Things to Know Before You Retire at 62
Learn About Collecting Social Security, Medicare and More
If you're aiming to retire at 62, you are not alone. Sixty-two is the average retirement age in the U.S. Before you turn in your resignation, be sure you're aware of the following three things.
1. You Don’t Have to Start Social Security Just Because You Retire
Many retirees say their biggest fear is running out of money. One way to protect your future income is to make 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 there are some Social Security strategies that married couples can use to get more out of their joint benefits than they would get if they each make their claiming decision 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 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 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 are 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 for Easier Withdrawal Management
If you have money in IRAs, 401(k)s or other employer sponsored plans, think about consolidating these various retirement plans into one account. Many people believe their money is safer when it is spread out across many different firms. The truth is 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 there is little-added safety by having accounts spread out across numerous financial institutions.
Another reason to consolidate: at age 70 1/2 tax rules require you to start taking distributions from your retirement accounts. It is 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 before you are required to do so. It will depend on your marginal tax bracket and your other sources of income. To figure out if this is appropriate 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.