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How to Retire at 60: Step-by-Step Plan


The traditional age of retirement is 65, but it’s possible to retire at age 60 with planning. Obstacles to early retirement include lack of access to Social Security benefits and Medicare. However, on the plus side 60-year-olds can withdraw from retirement accounts without penalty. Early retirees may also benefit from lower healthcare costs, improved ability to work part-time and a longer and more enjoyable retirement. A financial advisor can help you plan for retirement at any age.

Obstacles to Retiring at Age 60

Although it’s five years earlier than the traditional retirement age and even further from the age at which full retirement benefits are available from Social Security, 60 is close to the age at which most people actually retire. A 2021 Gallup Poll found the median age at which people retire is 62.

A key reason for the popularity of 62 as a retirement age is that this is the earliest age at which most people can qualify to receive Social Security benefits. Disabled people are usually the only ones who can get Social Security payments before age 62.

People often wait after 62 to start claiming Social Security benefits. For instance, the Social Security Administration says that, in 2018, the average claiming age was 64.7 for men and 64.6 for women. The main reason is that delaying increases the monthly benefit amount.

Access to Medicare is another reason why retiring at 60 can be challenging. Except for the disabled, people don’t normally become Medicare-eligible until the month they reach 65. The national healthcare program offers important assistance for coping with a potentially heavy financial burden of medical costs in later years.

Retiring at age 60 beats retiring earlier in one big way. Withdrawals from tax-advantaged retirement accounts including IRAs and 401(k) plans are subject to a 10 percent penalty until age 59 1/2. After that, there’s no penalty, although ordinary income taxes still apply.

Basics of Retiring at 60

retire at 60

Retiring successfully at any age requires balancing income with expenses. So, the first step in planning an early retirement is to decide how you want to live and how much income it will take to support that lifestyle. Next, you find out how much post-retirement income you can generate from investments, part-time work or other sources.

Then you compare the two figures.  If the income result is inadequate, it may be necessary to adjust the post-retirement lifestyle expectations or to change investment strategy or work plans to generate more income.

Steps For Retiring at 60

The first step for retiring at 60 is to determine how much money you’ll need. A rule of thumb for projecting necessary retirement income is to take pre-retirement income and multiply it by 70%. For instance, if you are earning $100,000 a year before retiring, this benchmark suggests you probably can maintain your lifestyle on $70,000 a year.

This rough guideline may need adjustment for individual situations. Early retirees, for example, won’t have Medicare. They may have to budget for private health insurance premiums. If so, their post-retirement income needs may be higher.

On the other hand, it may take less than 70% of pre-retirement income if the retiree cuts costs significantly by, for example, downsizing and moving to a place with lower costs of living. Paying off debt before retiring can also lower cost of living.

The second step is to actually save the money. Use a workplace retirement account like a 401(k), an individual retirement account or any other method that works for you; just make sure you’re adjusting your asset allocation over the years to fit your situation.

Finally, you need to plan how you’ll withdraw your money in retirement. When it comes to evaluating the adequacy of retirement assets, research suggests says that if you withdraw about 3% of your total portfolio to use for living expenses in retirement, your nest egg should last for at least 30 years. With this rule in mind, in order to withdraw $70,000, you would need a retirement portfolio of $2.3 million.

If your retirement nest is inadequate according to this guideline, it’s possible to be more aggressive and withdraw 4% or more. However, this may not be as safe. It’s also possible to adopt a more aggressive investment strategy that could generate more returns and allow a higher withdrawal rate. However, again, this involves taking on greater risk of running out of money.

Other ways to increase income include making maximum contributions to tax-advantaged retirement plans while stile working, starting a taxable investment program and considering part-time work after retirement.

Other Early Retirement Considerations

retire at 60

Bear in mind, you will only have to pay living expenses entirely out of investments until you claim Social Security. These benefits can make a big difference. The maximum annual benefit for people who claim at 62 in 2022, for example, is $28,368. And the maximum benefit for people who wait until age 70 to claim is $50,328. Any number of individual circumstances can significantly affect retirement age decisions. For instance, many people can count on pension income in retirement.

Life expectancy is also an important variable because it increases the number of years a nest egg has to last.

Bottom Line

Retiring early at age 60 is doable, with adequate planning. It may take some sacrifices in saving more money now or reducing expected post-retirement living standard. However, it’s only a few years before most people retire anyway.

Tips on Early Retirement

  • A financial advisor can offer valuable advice on how to arrange your finances so you can retire early. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. You can get started now here.
  • Your Social Security benefit depends on the year you were born, annual income, marital status and age of retirement. SmartAsset’s Social Security benefit calculator takes all these factors into consideration to estimate your benefits, including inflation.

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