Deciding whether to retire at 62 or 65 involves multiple factors. Retiring at 62 lets you enjoy retirement earlier, but claiming Social Security at that age reduces your monthly benefit. Retiring at 65 provides additional time to build savings but delays your retirement plans. Other important considerations include your health, financial situation and personal lifestyle goals.
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 align with that vision of retirement.
Many financial advisors recommend having enough savings to replace about 70-80% of your pre-retirement income. This percentage can vary based on your lifestyle and health care 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 period, 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 you retire at age 62, you’ll have more time to enjoy retirement activities but your monthly Social Security benefits will be reduced permanently. For example, 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. 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
Choosing when to retire can affect your finances and lifestyle. Therefore, deciding between retirement at 62 or 65 will depend on your financial situation, health needs and personal plans. Here are five key points to consider before making your decision.
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
Social Security benefits can increase by about 8% each year, if you delay claiming between your full retirement age and age 70. Therefore, claiming at 65 instead of 62 can result in higher monthly payments, which can significantly impact your long-term financial stability.
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.
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 helps lower healthcare costs. A retirement advisor can help you decide which retirement age matches your goals and finances.
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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