You’re Still Too Young For Medicare
If you’re thinking of retiring at age 62 — whether in conjunction with filing for Social Security or not — know that you’ll need to figure out health coverage. That’s because you won’t be eligible to sign up for Medicare coverage just yet.
Medicare eligibility doesn’t begin until age 65 . If you plan to leave your job and give up the group health coverage that comes with it, you’ll need to be prepared to either retain your existing coverage through COBRA or buy a new plan.
This assumes, however, that you can’t get onto a spouse’s health plan. If that’s an option, then you may be all set to leave your job from a healthcare perspective.
Whether you’re excited to turn 62 or not, be sure to keep all of this information in mind. It’ll help you navigate retirement-related decisions and make the right financial choices.
Something Else To Remember
If you decide to claim at age 62, then you’ll need to be aware of Social Security’s income limit.
Social Security allows recipients to continue working while collecting Social Security income, but if you earn above a set limit every year, you’ll have some of your Social Security benefits held back and paid out later.
In 2018, if you’re younger than full retirement age, you can earn up to $17,040 per year without any reduction in Social Security income. However, once your income exceeds that amount, Social Security will hold back $1 for every $2 earned.
This means that if you decide to collect benefits at age 62 this year and continue working, you might not receive all the benefits you expect. Don’t worry, though. Any money held back does go back into the formula used to calculate your full retirement age benefit and so this reduction will increase your future Social Security income.
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Reason #: Retire Early If You Can Feel Secure
Having the means and having security are a bit different. You might have enough to retire on, including early Social Security benefits, but can your finances withstand an unforeseen upheaval?
If youve got the early years of retirement covered and will have access to more financial security maturing and becoming available as you get older, youve got little reason to hold back on retiring early.
Use the NewRetirement Retirement Planner to assess the strength of your financial security now and into the future.
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Set Your Retirement Goals
How much you need to save depends on how you want to spend your retirement. Think about:
- your travel plans
- your age when you retire
- if you’ll work after you retire
- if you’ll have children or grandchildren to support
- where you want to live
- whether youll have debt to pay, such as a mortgage or a loan
Why It Makes Sense For The Higher Earner To Wait Longer To Collect
David and Linda are married. David’s primary insurance amount at full retirement age is $1,600 Linda’s is $1,450. They both have an FRA of 67.
If they both wait until 68 to collect, which means their benefits will increase by 8%, David’s benefits will be $1,728 , and Linda’s will be $1,566 .
That extra $12 per month means an extra $144 per year, or $2,880 over 20 years.
In addition, the spouse who lives longer will continue to collect the higher payments.
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How Much Can I Earn In 2020 And Still Collect Social Security At Age 62
In 2020, the yearly limit is $18,240. During the year in which you reach full retirement age, the SSA will deduct $1 for every $3 you earn above the annual limit. For 2020, the limit is $48,600. The good news is only the earnings before the month in which you reach your full retirement age will be counted.
Spouses And Social Security
You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.
Not married? Read Viewpoints on Fidelity.com: Social Security tips for singles
Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.
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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.
What Month Can You Start Collecting Social Security
You can start collecting Social Security in the first full month in which you are 62. That means if your birthday is on the 15th, you won’t be able to start collecting benefits until the month after you turn 62. If you were born on the first or second day of the month, you can start collecting benefits that month.
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Disability & Industrial Disability Retirement
If you have a disabling injury or illness that prevents you from performing your usual job duties with your current employer, you may be eligible for disability or industrial disability retirement. If your disability or industrial disability retirement is approved, you’ll receive a monthly retirement payment for the rest of your life or until you recover from your injury or illness.
| An injury or illness that doesn’t need to be job related | A job-related illness or injury | |
| Age Requirement | None | |
| Vesting Requirement |
Generally, you must have at least five years of service credit to be eligible. members must have 10 years. Some exceptions apply to the service requirement. Contact us to see if you qualify. |
None |
If you’re a patrol member in Bargaining Unit 5 of the Department of California Highway Patrol, you may be eligible for an enhanced industrial disability retirement benefit. You must have sustained a serious bodily injury as the result of a single event and must be unable to participate in substantial gainful employment.
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 124% of your full monthly benefit amount. The table below calculates the monthly increase rate by birth year:
| Delayed Retirement Increase |
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S To Launch Your Job Search After Retirement
Network onlineCreate a professional online presence. Update or launch work-specific accounts on LinkedIn, Facebook, Instagram and Twitter. Post and comment on elements of your profession or career. These can help showcase your career expertise. Use your social media connections to connect with potential employers and find job opportunities.
Create an age-proof resumeHighlight your experience without referencing your age. Keep your resume short, including only relevant or recent jobs but highlighting your accomplishments under a Career Highlights section at the top. Get rid of graduation dates or any other references that may give away your age. Make sure your email address is updated and timely and list your cell phone number never your landline. Dont include a fax number. Include social media info particularly related to the professional profile youve created with career-related social media accounts.
Online job search focused on older workersThere are online job search sites that specialize in connecting retirees and older workers with companies looking to hire, as well as sites that provide resources for older workers looking to get back into the workforce.
Self-EmploymentRetirement is an ideal time to try your hand at self-employment especially if you have retirement savings to support yourself. If theres a hobby you want to turn into a business or a line of work you always wanted to try, this may be a route back to the workforce.
How Your Social Security Benefits Are Earned
To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.
In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.
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Retirement Accounts And Required Minimum Distributions
Certain retirement accounts, including 401s and IRAs, follow a tax rule called required minimum distribution, or RMD.
This requires retirement plan account owners to withdraw money starting at age 72.
Even if you continue working past 72, you must take a RMD from your IRA.
If you dont, youll face a potential 50 percent tax penalty.
You might be able to delay taking RMDs from your current employer-sponsored retirement account, such as a 401 or 403.
To delay taking 401 RMDs, you must:
- Still be working.
- Have an employer-sponsored retirement account with the business you work for.
- Own less than 5 percent of the company you work for.
If you go back to work, consider adding money to your retirement accounts.
A law known as the SECURE Act of 2019 makes this possible. It allows all retirees to contribute to traditional IRAs and 401s if they earn wages.
People over age 50 can contribute up to $7,000 a year to an IRA. And if your company offers a 401 match, take it. Its essentially free money.
This can help increase your savings if you maybe didnt have much money in savings before returning to work, Ross told RetireGuide.
Contributing to a retirement account can also help offset taxes owed on your Social Security benefits because adding money to an IRA or 401 plan shrinks your adjusted gross income, Ross added.
Earnings Limit For Social Security Disability Benefits
So far we have been mainly focused on income limits for those on Social Security retirement benefits. Many people on Supplemental Security Income and SSDI wonder how work affects your benefits as well. In fact, they often ask, How much can I earn while on Social Security Disability in 2021? When it comes to SSI and SSDI, the rules are a little different. Receiving SSDI or SSI benefits means that a person has been found to be disabled and unable to perform substantial gainful activity. This essentially means that they are unable to perform any type of full-time work and thus earn an income. For those qualifying for SSDI or SSI benefits, an earner can make no more than $1,310 per month. Any income above this amount, even from self-employment, will make them ineligible to receive SSI or SSDI benefits.
Remember that those receiving SSI or SSDI might have to worry about Social Security taxes on their Social Security earnings as well. Since the income limits and average benefits are lower, most people receiving disability benefits will not be required to pay any taxes on their benefits. Remember that the Social Security tax limits are adjusted almost every year too, so make sure that you are aware of the current rules. Recipients of SSI and SSDI are also automatically enrolled in Medicare after a certain period of time.
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What If I Want To Work In Retirement
Sometimes leaving the workforce is neither feasible nor appealing. Thats why some retirees find part-time jobs to pass the time or earn extra money.
Getting a part-time job after retiring early may reduce your benefit amount until you reach full retirement age. The SSA may withhold a certain amount of money from your benefit check if your earnings exceed the annual limit. For 2021, your benefits will be reduced by $1 for every $2 you earn above $18,960. If youll reach your full retirement age in 2021, your benefits will be reduced by $1 for every $3 you earn above a different limit up until the month you turn 67. For a comparison, benefits were reduced in 2020 by $1 for every $2 earned above $18,240, and reduced by $1 for every $3 earned above $48,600 for those who reached full retirement age that year.
The SSA doesnt penalize working retirees forever. Youll receive all of the benefits the government withheld after you reach your full retirement age. At that time, the SSA recalculates your benefit amount.
Change In How You Report Earnings
The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.
However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.
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Reason #: Retire Early If You Want To Stay Healthier Longer
Theres no doubt that working and being active can help you stay healthy much longer than sitting with your feet up. But not all work is good for you sometimes its detrimental to your health.
Retiring at 62 from a backbreaking job or one with a disproportionately high level of stress can help you retain, or regain, your good health and keep it longer.
Just be sure to have a plan for being mentally, socially and physically active. Jobs are good for keeping you engaged, but not the only way.
Social Security: How Much Can You Get If You Retire At 62
Applying for early retirement affects the amount of money you will receive each month
The average Social Security check was never intended to replace all of a retired worker’s income, so it’s important that it be part of an overall retirement plan, not your only source of income.
So, if you have a few years left to retire, it’s vital that you start saving and investing while you still have time on your side.
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Social Security Income Limits
The Social Security Administration reported in October 2021 that the estimated average monthly retirement benefit will be $1,657. While that regular monthly income helps, it’s usually not enough to cover living expenses. That’s one reason many people are working longer.
If you work, the money you bring home can affect your Social Security benefitsbut the specifics depend on your age and how much you earn. Remember that, although your full retirement age might be 67, you can start receiving benefits at 62, even if you’re still working.
But here’s the catch: For the 2021 tax year, if you start benefits before full retirement age, you can only earn up to $18,960 and still get your full benefits. Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
In the year you reach full retirement age, Social Security becomes more forgiving. If you earn more than $50,520 it deducts $1 for every $3 you earnbut only during the months before you reach full retirement age. Once you reach full retirement age, you can earn any amount of money, and it won’t reduce your monthly benefits.
Note, however, that any money deducted from your benefit is not permanently lost. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that it withheld earlier.
Health Coverage In Retirement
Even if you start claiming Social Security retirement benefits at age 62, you wont be eligible for Medicare until you reach 65 years of age. Continuing to work can safeguard your health coverage. Without coverage through Medicare, a work plan, or your spouses health insurance, youll need to purchase an interim health policy and pay out-of-pocket until Medicare coverage kicks in at age 65.
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What Environment Should You Work In
You should carefully consider the type of work environment you want to be a part of before starting your workforce job hunt. The COVID-19 pandemic and subsequent Great Resignation has significantly changed where, when and how Americans work.
There are different advantages and disadvantages that make different work environments ideal for different people.
Work Environments to Consider When Returning to the Workforce
- In-person or on-site
- You may want to consider an on-site job if your desire to return to the workplace is heavily driven by a desire for social connections. It may also be better for you if you are looking for the structure you miss from working on-site during your career.
- Remote work
- Remote work means no commutes and the ability to work for an employer across the country without having to pack up and move. If you enjoy working on your own from anywhere you may want to consider jobs that offer this option.
- Flexible workplaces
- Flexible workplaces bring together the best of both worlds. They allow you to work on-site with co-workers sometimes while working remotely at other times. Hybrid environments can give you social interaction with the flexibility to work from home or on the road. It may also mean working either part-time or full-time, which gives you flexibility in how much of your retirement time you want to give up to an employer.
