How Much Will I Need To Retire At 62

May Not Be Too Early To Retire But It Is Too Early For Social Security

The good news is that retiring at 60 is much easier than retiring at 55, as penalty-free withdrawals from IRAs begin at age 59 1/2. But thats not to say its always easy.

As you work to figure out if you can retire at 60, cross Social Security benefits off your list of potential income sources. Eligibility for Social Security benefits starts at 62 for retirees. Also, youll want to weigh whether you should file for benefits as soon as possible or hold off for larger checks. This might mean taping retirement accounts to delay Social Security longer.

Another consideration is spousal benefits. Claiming benefits before full retirement age not only reduces your retirement benefits, but itll also reduce spousal benefits. If your benefits from your own working record are likely to be roughly equal, this wont matter much.

Social Security benefits include 35 years of average earnings, which might not be an issue for individuals who started working before 25 without interruption. But if you took a break to raise a family, go to law school, etc., the Social Security Administration might have to use $0 salary for a few years when calculating benefits.

Tax Considerations For Retirement

Any money you’ve set aside in tax-deferred retirement accounts plans or traditional IRAs but not Roth IRAs) will be taxed as ordinary income any time you make a withdrawal. You’ll also need to take required minimum distributions each year once you reach age 70½ or age 72 . Again, RMDs do not apply to Roth IRAs however, with IRAs and their RMDs, you won’t necessarily get to choose how much money to access once you’re in your 70s.

Many retirees are also unaware that up to 85% of their Social Security benefits could be taxable, depending on their total annual retirement income. This is why it’s vital to calculate your tax burden in retirement so you’re not counting on money that you may actually owe the IRS.

The exact financial situation required to retire comfortably at 62 varies from person to person. Figuring out what might work for you means determining how much you have saved, then factoring in taxes, health care costs and the costs of waiting for Social Security. You might also consider speaking with a qualified financial adviser to help determine a retirement savings strategy that fits your overall financial goals.

Should I Take My Social Security At 62

The minimum age to claim benefits is 62. 1 If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, you may want to delay increasing the size of your monthly benefit.

Also Check: Health Care Costs In Retirement

Reason #: Retire Early If You Have A Plan For Health Insurance

When you retire at 62, there are still 3 years left to wait before youll qualify for Medicare unless you qualify for disability. Youll need medical coverage to see you through until you turn 65.

Being healthy doesnt mean its OK to go without health coverage. If you can obtain a private policy to bridge the gap, then youre all set. If not, you might want to wait a bit longer to retire.

Here are a few ideas for how to afford healthcare before Medicare eligibility.

How Much Do You Need To Retire

For the average American, approximately $1.4 million should be sufficient for retirement. That said, everybodys needs are unique. The 4% rule can help you figure out your retirement savings requirements. This states that you should be able to take out 4% of your savings annually without ever touching the principal .

To determine what your 4% looks like, youll need to create a personal finance budget. Tally up all of your expenses, including rent, food, gas, health care, and utilities. This will reveal your annual expenses. Then, multiply that amount by however many years you plan to be retired. If you have $30,000 in annual expenses and plan for 25 years of retirement, for instance, youll need to save $750,000. This is the minimum to aim for.

While it might be supplemented by other funds , this nest egg can bring peace of mind. Plus, you dont want to rely on retirement benefits solely. The monthly benefit from the Social Security Administration wont get you far, and diversifying your retirement income is essential. This article explains your options, including a Roth IRA and a 401, as well as how to make more money for retirement.

Bonus:

You May Like: How To Retire Early With Real Estate

Recommended Reading: Can I Cash Out My Fidelity Retirement Account

Spousal Benefits Can Enable Insurance For An Early Retirement

An option that you may have if you are married is to use your spouses health insurance plan, Purkat explains.

I see in many cases, one spouse may be retiring early, but the other is still working full-time, Says Purkat. This is a great situation because if you can cover the years before you turn 62 with your spouses insurance, it can save you a lot of money.

How Much Do I Need To Semi

Semi-retirement is a sensible stepping stone for many people who aren’t quite ready to fully retire yet, either mentally or financially. You’ll be able to adjust to having more free time gradually and can supplement your state and private pension income with a salary.

Before you rush into semi-retirement, you need to be sure it’s a realistic prospect. If you resign from your job without considering frustrating hurdles, like the fact that candidates over 40 are 50% less likely to get a job offer, you could be on the road to serious financial difficulty.

If you’re aiming for a comfortable income and live alone, you’ll need to make sure the amount you can claim from state or private pensions and what you earn adds up to around £19,000.

Read Also: Individual Retirement Account Pros And Cons

How To Calculate Retirement Savings

In addition to using the above methods to determine what you should have saved and by what age, online calculators can be a useful tool to help you reach your retirement savings goals. For example, they can help you understand how changing savings and withdrawal rates can impact your retirement nest egg.

Although there are many online retirement savings calculators to choose from, some are much better than others. The T. Rowe Price Retirement Income Calculator and MaxiFi ESPlanner are two worth trying.

How Much To Save For Retirement

Naturally, the next question becomes: how much should a person save for retirement? Simply put, it’s an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.

Below are some general guidelines.

Read Also: Best Places For Americans To Retire In Mexico

How Much Does A Couple Need To Retire

Much like an individual, how much a couple needs to save to retire comfortably will depend on their current annual income and the lifestyle they want to live when they retire. Many experts maintain that retirement income should be about 80% of a couples final pre-retirement annual earnings. Fidelity Investments recommends that you should save 10 times your annual income by age 67.

Reason #: Retire At 62 If You Know What Else You Want To Do

Do you have a dream that youve always wanted to pursue, but never had the time? Maybe you want to write a novel. Have you toyed with the idea of joining the community theater? Or perhaps youve always wanted to grow your own food on a farm. Maybe you want to raise sheep, harvest the wool, and open a yarn shop.

If you have a real goal and you know youre passionate about it, youve got a good if not GREAT reason to retire early.

They say that no one ever reached very old age regretting the things that they did. Whats regretted are the things not tried, the chances not taken, the dreams left dusty and neglected on a shelf. If you are able, retiring at 62 can give you many years to seek out that dream and really enjoy it.

Also Check: Retirement Communities Near Parker Co

Insure But Also Take Good Care Of Your Health

The biggest thing to remember about early retirement, though, is to stay active and healthy, Purkat shares.

The worst thing you can do in retirement is sit around the house all day, He says. Be sure to exercise, stay involved in your community or even work a part-time job. These acts will all contribute to your overall health and wellbeing and can help keep your health care costs lower.

Studies have shown that staying physically active can also help fight off the onset of Alzheimers, the most common neurodegenerative disorder. This underscores the danger of a sedentary lifestyle.

How To Calculate How Much Youll Need To Retire

A common rule of thumb is that if you want to leave the workforce at 60, you will need about 15 times the amount you have calculated for your annual after-tax retirement expenses. So if you estimate $60,000 per year then you will need $900,000.

If you can wait until 65, you may only need 13 times expenses, which will be $780,000. Remember, if you plan to leave a legacy to your children or have a holiday home, then you need to add the cost to this estimate.

If youre planning to leave the workforce soon, a good back-of-the-napkin estimate is to have a retirement portfolio thats roughly 25 times the value of your annual post-work income. It goes like this: Consider how much money you want in annual income. Then subtract any government benefits and any other guaranteed income, such as a pension, and then multiply by 25.

For example, if you need $120,000 per year in future income and youll receive $30,000 from the pension, youll need roughly $2.25 million in savings.

Read Also: Resume Examples For Retired Person

Adding A Little Extra

Making small additional contributions to your super fund can make a difference when you do retire. So if you are able to, its a good idea to make voluntary contributions to your fund each year.

Based on 2021 ATO rules, you can make up to $27,500 in concessional contributions to your super account each year, which includes the 10.5 percent your employer is obliged to contribute to your chosen super fund each year and receive a tax benefit. By requesting your employer to make additional salary sacrifice contributions, this may mean the tax you pay could be reduced simply by making an extra voluntary contribution from your ordinary earnings to your super fund each year.

You can also consider contributing money to your super fund from any windfalls you may receive from inheritances or bonuses you receive through work. You dont necessarily need to add the whole amount from your windfall to your super although you could. Just be aware adding a portion of these funds to your super balance could make a difference when you retire, although you wont be able to access the funds until then in most cases.

It is important to note that there are limits to the amount of contributions you can make to super without exceeding your contribution caps. Refer to ato.gov.au for more information.

Annuity Vs Drawdown Whats The Best Option

Since 2015, people have been free to either purchase an annuity or go into drawdown, but whats the best option?

Annuity

An annuity provides a guaranteed income for life. The income you receive either remains the same or can increase over time in line with inflation.

The main benefit of purchasing an annuity is the certainty and security it provides. You will receive an income for as long as you live.

The main drawback of purchasing an annuity is the pitiful income it provides. For example, if you use your £200,000 pension to purchase an annuity at 60, you will receive just £4,848 per year. This assumes that the annuity increases each year and pays your spouse an income if you die.

Drawdown

The other option is to go into income drawdown. This is where you keep your pension pot invested and withdraw money as and when you need it.

The main benefit of a drawdown pension is that you have complete control and flexibility. You can choose to withdraw as little or as much as you like, whenever you like.

The main drawback of a drawdown pension is that if you withdraw too much, you will run out of money. Think of your drawdown pension like your bank account. If you withdraw too much, you will eventually have nothing left.

Whats the best option?

The best option will depend on your circumstances.

If you dont have enough income to meet the basics, you may want to purchase an annuity. This way youll always know that you have enough to cover the essentials.

You May Like: Usps Life Insurance After Retirement

How Much Do I Need To Retire At 55 62 65 70 Or At Any Age

How Much Do I Need To Retire at any age, or at 55, 62 or 65?

Before you actually start building a retirement plan, it would behoove you to ask yourself: How much do I actually need to retire?

Planning your retirement, without first knowing how much it will take for you to retire comfortably, is like picking out the furniture for a home that you haven’t yet built!

Fortunately, there is a perfectly logical way to answer the question how much do I need to retire at any age, 55, 62 or 65?

Before going into all the details, the below table provides an estimate of how much youll need to retire.

Need to Receive $40,000 Each Year After I Retire

Let’s assume you want to receive $40,000 each year after you retire, you’ll need to save the below by the time you retire:

* Social Security Income: Actual amount to be paid each year per Social Security Administrator’s Calculation today’s dollars* The differences in the Social Security Income are due to this factor: If you choose to delay the start of benefits to a higher age, you can then receive a larger monthly benefit for the rest of your life.* The younger you are today, the more inflation reduces the value of your savings each year before retirement. However, because you have a long time before you need to retire, you do not have to save as much money each year, as someone that is relatively closer to retirement.

Figuring it all out the details on how much you need to retire

Including Taxes

How To Retire At 60 Without Running Out Of Money

If you want to retire at 60 with the guarantee of never running out of money, you need to purchase an annuity. An annuity provides you with a guaranteed income for life. Its the only way you can be certain that the income will continue forever.

But the problem is, pension annuities provide very little income. You will need a big pension pot to do this.

Alternatively, you can flexibly drawdown an income from your pension pot. This allows you to take as much or as little money as you want when you want. But its not without risk, if you withdraw too much you will deplete your pension.

This is where working with an independent financial adviser can help. Regular reviews of your pension can help make sure you dont run out of money.

Read Also: How To Retire In 20 Years

Should You Delay Social Security Instead

The flip side of the Social Security coin is that waiting to take benefits can work in your favor. You can delay taking benefits up until age 70, which would then allow you to claim 132% of your full monthly benefit amount. The table below calculates the monthly increase rate by birth year:

How Much Should My Pension Pot Be Worth

This is a very personal question that will depend on the lifestyle you’d like to have in retirement. The sum will also depend on what you’re planning on doing with it. For example, you could save a smaller initial amount and siphon it off slowly using pension drawdown, allowing the fund to continue growing . Or you could purchase a pricier, but guaranteed, annuity, which will give you a set income every year.

Using Which?’s estimates, you would currently need to have a pension pot worth £757,000 to buy an income that gives you £41,000 a year. By comparison, you could enjoy the same lifestyle through income drawdown with just £442,020 saved but this is a riskier option with no guaranteed income at all.

Recommended Reading: How Much Should I Put Aside For Retirement

How Much Money Do I Need To Retire At 55

Planning to retire at 55 is different from planning to retire at 65 or older for one very important reason: Youll need more money to last you through your old age. If you were to retire at 65 and live to age 90, your money would need to last 25 years. But if youre retiring at age 55 instead, your savings now needs to be able to stretch for 35 years. And that assumes you stay healthy and dont require long-term care at some point, which could significantly drain your assets.

So how much money do you need to retire at 55? The short answer is that it depends on the type of lifestyle you want to have. If you plan to scale back and live a very minimalist lifestyle that allows you to keep expenses low then you may be fine with less money. On the other hand, you may need a larger nest egg if your early retirement plans include traveling, buying a home or starting a business.

When preparing a budget to retire at 55, consider:

• Your current monthly expenses

Recommended Reading: 4 Percent Rule Retirement Calculator