For some people, age 62 isn’t a very notable birthday. But for others, it’s a major milestone. No matter which camp you fall into, here are some things to keep in mind if you’re reaching the age of 62 this year.
1. You can claim Social Security if you want to
As long as you earned enough work credits in your lifetime, you can file for Social Security beginning at age 62. But whether doing so is a smart idea depends on your financial situation.
You’re not entitled to your full monthly Social Security benefit based on your earnings history until you reach full retirement age. If you were born in 1960, your full retirement age doesn’t kick in until 67. And so claiming benefits at 62 will mean reducing them by 30% — for life.
If you have a robust nest egg, you may be just fine filing for Social Security as soon as you’re eligible for benefits. But if you’re not super confident in your savings balance and you have the option to keep working, then you may want to hold off on signing up.
2. You can tap your retirement savings without penalty
Any money you have socked away in an IRA or 401(k) plan is yours to access penalty-free beginning at age 59 1/2. And so if you’re turning 62 this year, you can take withdrawals from your savings without restriction.
That said, you’ll need the money in your IRA or 401(k) to last for your entire retirement. And so if you’re still working, or if you have other income sources available to you, it could pay to avoid tapping your savings a bit longer.
Say you have a $500,000 nest egg that’s currently earning an average annual 5% return (that’s a bit of a conservative return, but an appropriate one for a near-retiree). If you were to leave your savings untouched for even two more years, you’d grow your balance to $551,000. That’s actually a pretty substantial difference.
3. You’re still too young for Medicare
If you’re thinking of retiring at age 62 — whether in conjunction with filing for Social Security or not — know that you’ll need to figure out health coverage. That’s because you won’t be eligible to sign up for Medicare coverage just yet.
Medicare eligibility doesn’t begin until age 65 (though you can enroll a few months before your 65th birthday). If you plan to leave your job and give up the group health coverage that comes with it, you’ll need to be prepared to either retain your existing coverage through COBRA (which may prove to be prohibitively expensive) or buy a new plan.
This assumes, however, that you can’t get onto a spouse’s health plan. If that’s an option, then you may be all set to leave your job from a healthcare perspective.
Whether you’re excited to turn 62 or not, be sure to keep all of this information in mind. It’ll help you navigate retirement-related decisions and make the right financial choices.
The $16,728 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.