Ask an Advisor: Can I Retire at 62? I’m 60 With a Pension, $700K Annuity and $100K in Cash

Can I retire at 62 ½? I have a pension that will be $1,300 a month. I will have $100,000 in cash and I have an annuity that’s currently worth $711,000. I’m currently 60. – James

What you’re asking doesn’t sound unreasonable, but as always, it depends on your individual situation and what your specific needs are. A retirement plan that works for one person may not work for the next.

For example, suppose you have a five-year life expectancy, only need $40,000 per year to maintain your lifestyle, and have no desire to leave anything to your heirs. Yes, go ahead and retire.

But if you have good reason to believe you will live past 90, need $150,000 per year to maintain your lifestyle and want to leave something for your kids, you will likely need to hold off on retiring now.

These are extreme examples, but they highlight the fact that the answer to your question doesn’t completely hinge on how much you have. How much you need is just as important. Let’s see where you currently stand so that you can assess whether or not it’s enough.

Need help deciding when you can afford to retire? Consider working with a financial advisor who specializes in retirement income planning.

Start With What’s Guaranteed

Your $1,300 per month pension is a good foundation. It will give you about $15,600 per year. That’s helpful.

You didn’t mention Social Security, which most people will qualify for in retirement. If that’s you, don’t forget to include that as well. It’s a major piece of the puzzle. At 62 ½, you’ll be eligible to start benefits at a reduced amount. Waiting even a few years can materially increase your income, though.

This presents a key planning decision:

Retire at 62 ½ and delay Social Security, or
Start Social Security early to reduce pressure on your other assets.

There’s no one-size-fits-all answer here, but that timing matters more than most people realize. It’s important to carefully consider your choice with actual data, not water-cooler opinions. (And if you need help deciding when to collect Social Security, consider working with a financial advisor.)

What Will the Annuity Pay You?

You said your annuity is worth about $711,000. That tells us the account value, but what we really need to know is the income it can produce. That depends on the type of annuity and your specific contract.

You may be able to convert it into a guaranteed monthly payout, withdraw it as a lump sum or you may need to consider moving into another contract. You may also have specific riders attached to it, such as an income rider, that affect how it relates to your distribution plan. You’ll need to review your specific policy contract to see your options.

If we assume a reasonable withdrawal or income rate in the range of 4–5%, that could produce between $28,440 and $35,550 per year. Combined with your pension, you might be looking at about $44,000 to $51,000 per year of guaranteed income, plus whatever you get from Social Security.

(And if you need help managing assets and other sources of retirement income, connect with a financial advisor.)

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$100,000 in Cash

Your $100,000 in savings gives you flexibility, which is good, but it’s not a long-term income source. Think of this as:

An emergency reserve
A short-term spending buffer (allowing you to delay Social Security payments)
A way to avoid pulling from investments in a bad market year (protection from sequence risk)

Used correctly, your cash position can help smooth out your income strategy in the early years of retirement, giving your long-term investments more time to recover and compound before you need to rely on them. (And if you need help finding professional financial advice, this matching tool can connect you with fiduciary advisors for free.)

What Do You Spend?

Everything above is just half of the equation. The next step is to compare it with what you need to live on each year.

If your spending is less than what you tallied up above (including Social Security if it’s applicable) then you’re in good shape. If not, you may need to wait or adjust your budget if possible.

Even if the numbers work today, retiring at 62 ½ introduces a few risks:

Longevity risk: Your plan may need to last 25 to 30 years, or perhaps even longer.
Inflation: Fixed income sources (like your pension) lose purchasing power over time. Your spending will also increase over time.
Sequence risk: If you rely on withdrawals early, market downturns matter more. Again, your cash can help you here.
Healthcare costs: You’ll need coverage before Medicare kicks in at 65.

The fact that these risks exist doesn’t mean that you shouldn’t retire. They just mean the plan needs to account for them. (Consider working with a financial advisor on a plan to mitigate the various risks you could face in retirement.)

Bottom Line

In your position, there are many people who would be able to retire just fine, and many who wouldn’t. It’s an individual decision based on whether or not their assets can support their retirement needs.

If your assets align with your goals, you’re in a strong position. Planning helps you move forward with clarity if you’re ready. If not, it highlights what you can adjust, such as working an extra year or delaying Social Security, to improve your outlook.

Retirement Planning Tips

Planning for retirement can feel like putting the pieces of a complicated puzzle together. That’s why it can help to have a financial professional in your corner. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get sta r ted now.
Diversifying across tax-deferred, tax-free and taxable accounts can give you more control over how and when you draw income in retirement. By spreading assets across traditional retirement accounts, Roth accounts and brokerage accounts, you can choose which sources to tap based on your tax situation each year.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.