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How to Retire at 64: Step-by-Step Plan


In many Americans’ minds, the traditional retirement age is 65. But often people want to wrap up their career sooner than that. According to a 2021 report from Natixis Investment Managers, younger generations plan to retire earlier. Members of Generation Y believe they will retire at age 60. Generation X believes they’ll retire only two years later, at 62. Retiring at 64 brings some unique issues, but they’re nothing that some financial planning can’t account for.

financial advisor can offer invaluable help as you create or update your long-term retirement plan.

Step 1: Define Your Ideal Retirement

Knowing what you want when you retire will both motivate you and help you plan. However, the image of retirement has seen some remodeling. In the past, you worked up to a ripe old age. Then, you drew on a pension or savings to live out the rest of your time. Nowadays, retirement can look very different.

Some people transition to a partial retirement where they continue to work part-time. Others pick up a full-time gig, but in something they’re passionate about. And, of course, there are still plenty of people who want to buy property down south and kick their feet up. But with all these various ideas of what retirement can look like, it’s important to narrow down your ideal.

Step 2: Calculate How Much You’ll Need to Retire

Generally, experts believe that the average retiree will need approximately 80% of their pre-retirement income to maintain their lifestyle. You make this amount up with savings and post-retirement income like Social Security benefits. So, if you earned a $100,000 salary, you would need about $80,000 each year to keep up your current lifestyle.

But chances are you probably won’t spend as much in retirement. According to a Consumer Expenditure Survey from the Bureau of Labor Statistics, people between 55 and 64 spent around $66,139 from 2019 to 2020. But that dropped to $52,928 for the age group 64 to 74. And people 75 years and older spent even less at $41,471.

Different experts provide their own goal number, too. So, you can save for your approximate needs and compare it to what the experts project. For example, Fidelity recommends saving 10 times your pre-retirement salary by the time you hit age 67.

Step 3: Cut Your Costs

Spending mindlessly can eat up your savings, leaving you with nothing for retirement. The sooner you put the reins on your wallet, the more you save in the long-term. So, it’s never too early to start cutting down on costs.

That means tracking your spending habits. Experts recommend collecting between three to six months’ worth of expenditures, like bank statements, bills, debts and receipts. Then you split your spending up into “needs” and “wants.”

Needs are costs you can’t cut back on. You have to continue to pay them. In contrast, wants are things you enjoy, such as entertainment. With it all laid out, you can plan your need-based spending at the beginning of the month and pull money from your want category.

You can also draft a post-retirement budget. With it, you can extend your savings, ensuring you don’t run out of funds. Many of your essential expenses from before retirement will carry over. But it doesn’t hurt to review your expenses in the months leading up. In addition, you may also have some new ones. Healthcare costs may change, for example. If you need to pay for healthcare before you become eligible for Medicare, that gets added on.

You should also consider your tax responsibilities pre- and post-retirement.

Step 4: Grow Your Income

Retiring early, even by a year, can lead to some hefty costs. Saving at the rate you are may not be enough to support you. So, you may need to consider ways to bulk up your income.

Your peak earning years typically occur during your 40s and 50s. You can capitalize on that salary by asking for a promotion or raise at your workplace. Or, alternatively, you could pick up a side hustle. The goal here isn’t to raise the quality of your lifestyle but make it easier to stockpile funds.

You should also focus on putting money away into your retirement plan. For some, this may mean maxing out your contributions to your account. Or, you may want to meet your employer’s match. If you’re 50 or older, you can also take advantage of catch-up contributions, which allow you to bypass normal contribution limits.

Step: 5 Create Streams of Income

In the first step, we talked about varying types of retirement. Many people continue to do some type of work after they “retire” so they can continue to earn an income. But you don’t have to actively work to do that. Another option available to retirees is passive income. The IRS has certain rules that determine whether work is passive or not. For example, working under 500 hours in a trade or business activity might not count as material participation. Thus, making it passive.

Passive income provides you with steady money without costing you a ton of involvement. Some ways to earn passive income include:

  • A robo-advisor investment portfolio
  • Dividend stock
  • CD ladder
  • High-yield savings account
  • Renting out real estate
  • Writing and publishing an e-book
  • Starting a blog
  • Creating a YouTube channel

Passive income gives you financial stability but doesn’t cut into your time or energy. Thus, freeing you up to enjoy your retirement. In addition, passive income can be subject to long-term capital gains taxes, which are cheaper than short-term capital gains taxes. So, you can save money.

Step: 6 Prepare for Healthcare and Long-Term Care Costs

How to Retire at 64

When you reach age 65, you can start receiving Medicare benefits. That is a relatively hard and fast rule unless you meet certain qualifications, like a disability. This program helps cover the cost of healthcare for retirees with both basic offerings and supplemental policies.

But if you retire before age 65, then you need to find alternative health insurance. Granted, if you retire at 64, that only leaves a year for you to cover. And for part of that year, you can take advantage of the Consolidated Omnibus Budget Reconciliation Act (COBRA). Through this, you have the option to extend your workplace’s health benefits for a minimum of 60 days.

However, not every retiree may have the option of COBRA. There are eligibility rules, and it costs more outside of employment because your employer no longer contributes to the plan.

You can also hop onto your spouse’s plan if they still work, though. Or, you can purchase new health insurance, either through the Marketplace or a private insurer.

Step 7: Remove or Minimize Your Debt

No matter how much you save, you can risk losing a significant amount if you carry too much debt into retirement. So, many future retirees should consider a debt repayment schedule while they still work.

In particular, you should focus on paying off high-interest debt. Credit cards are one of the most important places to start. They can charge interest rates in the teens if you carry a balance between months.

You may also want to consider paying down loans such as student loans, auto loans and your mortgage. Reducing these drains will improve your financial stability in the future. Remember: you will likely have less income to work with in retirement. So, debts pose a greater risk to your financial security.

Step 8: Determine the Best Time to Take Social Security

According to the Social Security Administration (SSA), an average of 65 million Americans received Social Security each month during 2021. And many of them are retirees. Almost nine out of 10 people at the age of 65 and older receive benefits. The same report cites that Social Security makes up about 30% of elderly recipients’ income, but that varies depending on age and gender.

However, you don’t have access to 100% of your benefits until your full retirement age (FRA). This number depends on the year you were born. The SSA has an online calculator to help you find yours.

Suppose you were born after 1960. Your FRA is 67. The first month you can start collecting your benefits is 62. At that age, you would see a 30% reduction to your monthly retirement benefit. That reduction drops as you reach your FRA, but you still face that reduced amount.

In contrast, if you hold off collecting benefits until age 70, your Social Security payment will rise. That’s because the government offers delayed retirement credits. For every month after reaching your FRA until you hit 70, Social Security increases. It grows by two-thirds of 1%, for a total of 8% each year. So, if your FRA is 67 and you wait until 70, you get another 24% added to your monthly payment.

Step 9: Seek Guidance From a Financial Professional

With all the above steps, you can see a lot of thought goes into retirement. Failing to make a strong strategy can cost you in the long run. That’s where a financial advisor comes in. They offer a wide range of services that will improve your retirement plan.

For example, they can help you estimate the amount you need to retire and create benchmarks to reach it. That might mean reviewing your investment strategy, reducing the burden of taxes, drafting a budget or rebalancing your investment portfolio.

Some financial professionals specialize in retirement, too. So, consider speaking to a qualified individual who knows how to guide you.

Step 10: Maximize Your Savings

You might still want some ideas on how to max out your savings. Consider some of these options:

Take Advantage of Your Employer’s 401(k) Match

Many employers offer a matching contribution program along with their 401(k) plans. They may do this in one of two ways. First, they match your own contributions up to a certain percentage. Or, second, they match 100% of your contribution up to a specified percentage of your salary.

401(k)s face annual and lifetime contributions. For instance, it was $19,500 for the 2021 year and for 2022 it’s $20,500. But your annual limit does not include your employer’s matching contributions. Their additions only count toward the overall limit.

Invest Whatever You Can

A few strategic investments can really boost your savings. You can customize your strategy to fit your risk tolerance and timeline as well.

For instance, investors who want predictable growth with little risk can consider municipal bonds, fixed index annuities and a universal life insurance policy. Even just switching to a high-yield savings account can make a difference over several years.

If you’re planning for retirement young, you can probably accept more risk. In that case, you can think about standard options like stocks, bonds and exchange-traded funds (ETFs).

Of course, anyone new to investing should consider seeking out guidance. Speak to a financial advisor if you have questions.

Utilize Alternative Retirement Accounts

Traditional 401(k)s aren’t the only retirement accounts out there. Putting your money into different options can help you top up your savings. These are some valuable options if you max out your 401(k):

  • Individual Retirement Accounts (IRAs)
  • Roth IRAs
  • Health Savings Accounts (HSA)
  • Taxable Investment Accounts

Bottom Line

How to Retire at 64

Retiring early, even by a year, requires special consideration. So, whether you want to retire at 35, 50 or 64, you should take your retirement seriously. Many challenges may pop up between your elected retirement age and the traditional retirement age. These steps should get you started on a comprehensive plan. But, in the end, the best instructions come from the professionals. Think about seeing a financial advisor before you start changing your retirement plan.

Retirement Tips

  • Planning for retirement may sound easy, but it takes more than just saving. Consider speaking with a financial advisor to come up with your perfect strategy. 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.
  • A lot of estimation goes into retirement planning. Technology can make it easier. Try out a retirement calculator to start thinking about your needs. A Social Security calculator can also help you guess at your benefit amount.

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