What Age Should You Retire: 62 or 65?

Deciding whether to retire at 62 or 65 depends on more than just the numbers. Retiring at 62 gives you extra years of freedom, but your monthly Social Security checks will be smaller. Waiting until 65, on the other hand, will give you more time to save and immediate Medicare eligibility, but three more years of working may not feel worth it if your health or energy is declining. Your decision could also be different if you are someone with a pension and no debt or still carrying a mortgage.

A financial advisor can help you determine when you should retire and create a plan to reach those long-term goals.

How to Start Thinking About When You Should Retire

Start by envisioning what you want your retirement to look like. Do you plan to travel extensively, pursue hobbies, or perhaps start a new venture? Understanding these goals will help you estimate the financial resources you’ll need, and how your current savings, investments and potential Social Security benefits line up with that vision of retirement.

Retirement savings guidelines often recommend that you anticipate a replacement of 70-80% of your pre-retirement income. This percentage can vary based on your lifestyle and healthcare needs, so tailor it to your specific situation. If you have a family history of longevity and are in good health, you might plan for a longer retirement, which requires more savings. While you can begin collecting Social Security as early as age 62, waiting until your full retirement age (typically between 66 and 67) or even until age 70 can increase your monthly benefits.

Example: Retirement at Age 62 vs. 65

If your full retirement benefit at age 67 is $2,000 per month, retiring at 62 could lower your monthly benefit by about 30%, down to approximately $1,400 ¹ . You’ll also need savings or other income to cover expenses, including healthcare costs, until Medicare starts at age 65.

Retiring at age 65, on the other hand, can help you balance working longer and claiming benefits early. Using the same example, your monthly Social Security benefit at 65 might be around $1,733, roughly 13% lower than your full benefit at 67, but significantly more than claiming at 62. You’ll also immediately qualify for Medicare, reducing healthcare expenses. Plus, you’ll have three additional years of work to build savings and pension benefits.

Tips for Choosing Between Retirement at 62 or 65

Your retirement age influences your healthcare options, your daily routine and how much you’ll receive from Social Security. Choosing between 62 and 65 requires you to assess different factors, including your savings, health and retirement goals. Here are five key factors worth considering before you decide.

Evaluate Your Financial Situation

Assess your retirement savings, investments and potential Social Security benefits. Make sure your savings can cover the gap if you retire early. Also, many employer-sponsored pensions don’t start paying until age 65.

Consider Health and Longevity

Your health and life expectancy are important factors in retirement planning. If you have health concerns or a family history of shorter lifespans, retiring earlier might allow you to enjoy more active years. On the other hand, if you anticipate living longer, delaying retirement could help you maximize your benefits.

Understand Social Security Implications

Claiming Social Security at 65 instead of 62 can result in higher monthly payments, which can significantly impact your long-term financial stability. Social Security benefits can increase by about 8% each year if you delay claiming between your full retirement age and age 70.

Reflect on Personal Goals and Lifestyle

Think about what you want to achieve in retirement. If you have plans that require more time and energy, such as traveling or pursuing hobbies, retiring at 62 might be more appealing. However, if you enjoy your work and wish to continue contributing to your retirement accounts, waiting until 65 could be beneficial.

Evaluate Healthcare Needs

Healthcare costs can be a major expense in retirement. Medicare eligibility begins at 65, so retiring at 62 means you’ll need to secure alternative health insurance for three years. Consider how this affects your overall retirement budget.

Where to Start: Compare Retirement Income Sources

Comparing your retirement income sources at 62 versus 65 gives you a clearer picture of what each timeline actually looks like. Your money may come from several places, including Social Security, personal savings, pensions and investment accounts, and retiring even a few years apart can significantly change how much you receive from each one.

Social Security

Whether you start claiming Social Security at 62 or 65, you’ll receive reduced monthly payments for life, assuming your full retirement age is 67. The difference is in how much your payments will be reduced. 

The Social Security Administration generally reduces your benefits by 5/9 of 1% for each month you claim benefits before your normal retirement age, up to 36 months. If you claim more than 36 months early, benefits are further reduced by 5/12 of 1% each month.

This means if you claim at 62, you’ll see a 30% reduction in benefits, while claiming at 65 will result in a smaller reduction of 13.3%. 

That difference adds up. Over a 20-year retirement, waiting just three extra years could mean tens of thousands of dollars in additional income.

However, claiming earlier lets you draw on benefits while preserving your savings for longer. If you retire at 62, you’ll need to rely more heavily on your personal savings, investment accounts, or part-time jobs to bridge the gap until Medicare eligibility at 65. If you wait until 65, your Social Security payments will be higher, and you’ll have had three extra years to save, invest, and possibly receive employer contributions.

How Working Longer Affects Pension and 401(k) Growth

Working until 65 doesn’t just increase your Social Security benefits, it can also give your retirement accounts more time to grow. Continuing to contribute to a 401(k) or IRA allows for additional employer matches or catch-up contributions and compounding returns.

For instance, if you have a $500,000 investment portfolio growing at a modest 5% annual return, working three extra years could increase your balance to nearly $579,000, or an extra $79,000 without any additional contributions. If you continue adding to your account, say, $10,000 per year, that balance could exceed $610,000 by age 65.

Delaying retirement also helps pension benefits if your employer plan bases payouts on years of service or final salary. In many cases, an extra few years can substantially raise your guaranteed monthly pension income.

How to Calculate Break-Even Point Between Claiming at 62 and 65

To figure out your personal break-even point between claiming at 62 and 65, start by pulling your Social Security statement from ssa.gov. It shows your estimated monthly benefit at 62, full retirement age and 70, and those three numbers form the foundation of any claiming decision. For example, if your full retirement age benefit is $2,000 per month, your reduced benefit at 62 would be approximately $1,400 and your benefit at 65 would be approximately $1,733.

The break-even point is the age at which the total cumulative benefits from claiming later overtake the total from claiming earlier. If you claim at 62, you collect more payments, but each one is permanently smaller. If you wait until 65, you give up three years of payments but receive a higher amount for the rest of your life. For most people, the break-even point between claiming at 62 versus 65 falls somewhere in the late 70s to early 80s, meaning anyone who lives past that age comes out ahead by waiting.

Healthcare costs during the gap between 62 and 65 need to be part of the calculation. Medicare does not begin until 65, so early retirees must fund their own coverage through COBRA, a marketplace plan, or a spouse’s employer plan. Depending on your age, location, and health status, that coverage can cost $15,000 to $25,000 or more than Medicare per year. Those costs reduce the net benefit of retiring early and should be subtracted from the Social Security income you would receive during those years.

To see the full picture, combine Social Security with your other income sources at each claiming age. Add together your pension, 401(k) or IRA withdrawals, and any other income, then subtract your estimated expenses including healthcare. Run the comparison at both 62 and 65 to see which scenario leaves you with a more sustainable income over a 25- to 30-year retirement. The claiming age that produces a comfortable margin between income and expenses across the full time horizon is generally the stronger choice.

If you are married, the calculation becomes more involved because both spouses’ claiming ages interact. The higher earner’s benefit determines the survivor benefit that the lower-earning spouse will receive after the first death. Delaying the higher earner’s claim increases that survivor benefit, which can provide financial protection for decades. Running the numbers as a household rather than as two individuals often changes the optimal strategy.

Costly Mistakes People Make When Choosing Between 62 and 65

One of the most common mistakes is claiming Social Security at 62 while still earning significant income. If you haven’t reached full retirement age and your earnings exceed the annual limit, the Social Security Administration temporarily reduces your benefits by $1 for every $2 you earn above that threshold. The withheld amount gets recalculated into a higher monthly benefit later, but the cash flow disruption catches many early claimers off guard.

Not budgeting for healthcare between 62 and 65 is another costly oversight. Medicare doesn’t start until 65, and bridging that gap is expensive. COBRA coverage can run $1,500 or more per month for a couple, and marketplace plans aren’t much cheaper for applicants in their early 60s. Three years of self-funded insurance can easily consume $50,000 to $75,000, which significantly offsets the benefit of collecting early payments.

Some retirees claim early planning to invest the Social Security payments and make up the difference. This assumes consistent positive returns, which the market doesn’t guarantee. Meanwhile, delaying Social Security provides a guaranteed increase of roughly 6% to 8% per year in monthly benefits between 62 and full retirement age. That’s difficult to replicate with any investment on a risk-adjusted basis.

Married couples frequently make the decision individually when they should be thinking as a household. If the higher-earning spouse claims at 62 and dies first, the survivor is locked into a smaller benefit for life. Delaying the higher earner’s claim even by a few years can meaningfully increase what the surviving spouse depends on, especially when there’s a significant age or income gap.

Early claiming also affects how much of your benefit is taxable. Social Security income counts toward the combined income formula the IRS uses to determine tax on your benefits. Adding those payments on top of pension income, retirement withdrawals and part-time earnings at 62 can push more of your benefit into the taxable range than if you’d waited and drawn from savings instead. This tax cost rarely makes it into the break-even analysis but can reduce the net value of early payments by a meaningful amount.

Bottom Line

Choosing whether to retire at 62 or 65 depends on your personal situation and finances. Retiring at 62 provides more time for hobbies, travel, or part-time work. Retiring at 65 offers larger Social Security payments, more time to save, and immediate Medicare eligibility, which can help lower healthcare costs.

However, your retirement age doesn’t have to match your Social Security claiming age, and separating the two can be an important strategy.

“If you have substantial savings in tax-deferred accounts that will later be subject to RMDs, you may want to begin taking some distributions before claiming Social Security,” said Tanza Loudenback, CFP®.

Using those funds early can help you reduce the balance subject to required minimum distributions (RMDs) later. Alternatively, you could convert some tax-deferred funds to a Roth account, paying taxes now instead of down the road.

“With either strategy, delaying Social Security serves a dual purpose of keeping your taxable income down in the early years of retirement and boosting your eventual monthly check,” Loudenback added.

Tanza Loudenback, Certified Financial Planner™ (CFP®), provided the quote used in this article. Please note that Tanza is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.

Retirement Planning Tips

• A financial advisor can help you determine when is the best time to claim Social Security and manage other factors to maximize your benefits. 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 started now.
• Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

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