A lot of people regard age 65 as one of those “milestone birthdays.” So if you’re turning 62 next year, it may fly under your loved ones’ respective radars just a bit.
But actually, 62 is an important age on the road to retirement. And so if that’s the age you’ll be reaching next year, here are some key points to keep in mind.
1. You can claim Social Security — but at a reduced rate
Age 62 is the earliest point at which you can claim Social Security. But if you file at that age, you’ll reduce the monthly benefit you’re entitled to collect — potentially for life.
You’re entitled to your full monthly benefit based on your personal earnings history once you reach full retirement age, or FRA. But that age won’t arrive until 66, 67, or 66 and a specific number of months, depending on your year of birth.
If you claim Social Security as soon as you turn 62, you’ll end up with a monthly benefit that’s only worth 70% to 75% of what it would’ve been worth at FRA. And so you’ll need to decide how badly you need or want that money if you’re thinking of filing that early.
Keep in mind, though, that if you decide not to sign up for benefits at age 62, there’s nothing you need to do from a Social Security standpoint next year other than check your annual earnings statement and make sure your listed wages are accurate. You can access that statement on the Social Security Administration’s website by creating an account there, or you can wait for it to arrive in the mail.
2. You can tap your IRA or 401(k) without penalty — but you may want to wait
Once you turn 59 1/2, you can access the money you’ve been socking away in an IRA or 401(k) plan without having to worry about getting hit with an early withdrawal penalty. As such, if you’ll be 62 next year, you can take as much money out of your IRA or 401(k) as you want.
But you may want to hold off on tapping your nest egg if you’re only 62. Americans are living longer these days, and it’s conceivable that you could end up needing your nest egg to last well into your 80s or 90s. And so if you’re able to keep working come age 62, then it pays to leave your nest egg alone.
3. You can’t sign up for Medicare just yet
Some people make the decision to file for Social Security at age 62 and use that money to kick off their retirement. But if you go that route, you should know that you won’t be able to sign up for Medicare just yet.
Medicare eligibility only starts at age 65. If you stop working at age 62 and lose your employer health coverage, you’ll need to pay for private insurance on your own for a number of years until Medicare becomes an option.
Of course, you may have the option to jump onto a spouse’s plan. But if not, you should prepare for some pretty hefty costs.
Whether you consider 62 a big birthday or not, it’s important to keep all of these points in mind if that’s the age you’ll be reaching in the new year. That way, you’ll be in a good position to manage your Social Security benefits, preserve your nest egg, and make smart healthcare coverage choices.
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