We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
How to Retire at 62 – All the Numbers You Need to Know
Radon Stancil and Murs Tariq continue their discussion from Episode 292 on How to Retire at 62. In this follow-up, they welcome their team member, Taylor Wolverton, to dive into the numbers of a real-world retirement financial plan. Together, they walk through detailed retirement scenarios for someone looking to retire at 62, highlighting critical strategies…
How to Retire at 62 – All the Numbers You Need to Know
We show you all the numbers and scenarios you need to consider when planning to retire at 62. Whether you’re looking for a realistic retirement income strategy, Social Security timing advice, or answers to questions like.…..
Retiring at 62 is a dream for many people, but it can also feel overwhelming without the right plan in place. You might be asking yourself questions like: How much do I need to retire at 62? or Will my savings last throughout retirement? These are important concerns that require clear answers and a well-thought-out financial strategy.
At 62, you’re at a unique crossroads. You may be eligible to begin receiving Social Security benefits, but should you take them early, or wait for a higher benefit later? You’ve likely spent years contributing to a 401(k) or other retirement accounts, but how do you turn those savings into reliable income? And what role does inflation play in your ability to retire comfortably?
In this blog, we’re going to show you all the numbers and scenarios you need to consider when planning to retire at 62. Whether you’re looking for a realistic retirement income strategy, Social Security timing advice, or answers to questions like How much to retire at 62? This comprehensive guide will give you the clarity you need.
Using a financial plan example, we’ll explore every critical detail: income, expenses, inflation, and even what happens if you decide to work part-time. By the end, you’ll see exactly what it takes to retire at 62 and feel confident about your future.
If retiring at 62 is your goal, it’s time to take action. Let’s dive into Cindy Martinson’s story to see how you can secure your retirement and enjoy your golden years with peace of mind.
Setting the Stage for Retirement Planning at 62
Let’s introduce Cindy Martinson, a 61-year-old professional earning $200,000 per year. She has done a great job saving for retirement, accumulating:
401(k) Balance: $1,000,000
Cash Savings: $50,000
Brokerage Account: $200,000
Cindy’s goal is to retire in June 2026, when she turns 62. Her monthly expenses are $6,000, and she wants to know: Will her retirement plan work?
To answer this, we’ll walk through her numbers step by step, showing you how to plan for retirement at 62, including Social Security at 62, 401(k) withdrawal strategy, and inflation factors.
Step 1: Retirement Income at 62
One of the first steps in building a retirement financial plan is identifying income sources. For Cindy, her income will transition as follows:
2026 – The Year She Retires
Salary Until June: $83,000 (partial year of work)
Social Security: Starts in June at $13,000 for the remainder of the year.
By 2027, Cindy will receive her full annual Social Security benefit of $27,097. While some may delay Social Security for higher payments, starting at 62 made sense for Cindy’s retirement income strategy.
Note: Social Security benefits can increase over time due to cost-of-living adjustments (COLA). However, to keep the plan conservative, we assumed no COLA increases.
Step 2: Expenses and Inflation
Cindy’s current monthly expenses are $6,000, or $72,000 annually. However, inflation means her costs will rise over time. We included a 3% annual inflation rate in her retirement financial plan. Here’s what her expenses will look like as she ages:
2026 (Age 62): $74,160
2036 (Age 72): $96,000
2046 (Age 82): Over $129,000
Inflation is often overlooked, but planning for it ensures you won’t run out of money as your cost-of-living increases.
Step 3: Retirement Portfolio and Withdrawals
With $1,000,000 in her 401(k), $200,000 in a brokerage account, and $50,000 in cash savings, Cindy’s portfolio starts strong. The question becomes: Can her withdrawals sustain her lifestyle?
Here’s a breakdown of her withdrawals:
2026: $6,000 (partial year of withdrawals)
2027: $51,000
2030: $53,000
2040: $60,000
Even with withdrawals increasing over time, Cindy’s balance holds up well. By age 90, she still has $933,000 in her portfolio – a clear sign that her retirement plan works.
The Key Assumptions:
Rate of Return: 6% annually (net of fees).
Inflation: 3% annually.
Social Security: $27,097 per year starting at 62.
Step 4: Required Minimum Distributions (RMDs)
At age 75, Cindy will face Required Minimum Distributions (RMDs). RMDs are mandatory withdrawals from tax-deferred accounts, like a 401(k) or IRA. The IRS forces you to start taking these withdrawals to collect taxes.
The good news is that Cindy’s plan already accounts for RMDs. Her portfolio balances and cash flows remain stable even after the withdrawals begin.
What If Cindy Works Part-Time?
Many people hesitate to fully retire at 62, so we ran an alternative scenario for Cindy. She asked: What if I work part-time until I’m 65?
In this scenario:
Cindy earns $50,000 per year working part-time.
She delays Social Security until age 65, increasing her annual benefit to $33,548.
The Impact on Her Retirement Plan
By age 90, Cindy’s portfolio balance grows to $1,465,000 (instead of $933,000). Working part-time gives her more flexibility and financial security.
This example shows how even a small change, like part-time work, can significantly improve your retirement plan.
The Importance of Flexibility in Retirement Planning
Retirement planning is not a one-and-done process. Life changes, goals shift, and your plan needs to adapt. For Cindy, having a live retirement financial plan allows her to:
Adjust her retirement scenarios (e.g., working one more year).
Explore different withdrawal strategies.
Account for changes in expenses, income, or market returns.
Annual reviews ensure her retirement plan stays on track, no matter what life throws her way.
Key Takeaways: How Much Do You Need to Retire at 62?
To retire comfortably at 62, here are the critical factors to consider:
Current Savings: Cindy’s $1,000,000 401(k) gave her a strong foundation.
Expenses: Know your monthly and annual spending needs.
Inflation: Plan for rising costs (3% annually is a safe assumption).
Social Security: Starting at 62 worked for Cindy, but delaying can increase benefits.
Withdrawal Strategy: Managing how much you withdraw ensures your portfolio lasts.
Flexibility: Consider part-time work or delaying retirement for added security.
If you’re asking yourself, How much do I need to retire at 62? the answer will depend on your unique situation. A personalized financial plan is the key to retiring comfortably and securely.
Ready to Secure Your Retirement?
If you want to understand all this a little better, we offer a complimentary phone call that you can schedule with us on our website. If we can’t answer all your questions in just 15 minutes, we’ll guide you to the next steps to find the answers you need.
Retirement at 62 is achievable with the right plan in place. Whether you’re planning your Social Security at 62, optimizing your 401(k)-withdrawal strategy, or exploring retirement income options, having a clear financial plan will give you peace of mind. Start planning today to ensure you can enjoy retirement comfortably and securely!
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for November 18, 2024
How Much Money Do I Need Saved to Spend 10,000 Per Month in Retirement?
Radon and Murs discuss the question many retirees and pre-retirees ask: “How much money do I need saved to spend $10,000 per month in retirement?” This is a highly specific question that requires a tailored approach to retirement planning. Radon and Murs reverse engineer this scenario…
How Much Money Do I Need Saved to Spend 10,000 Per Month in Retirement?
Retirement is something many of us dream about after years of hard work and diligent saving. One of the biggest questions that might come to mind as retirement approaches is, “How much do I really need to save to enjoy the lifestyle I want?” Specifically, you might be wondering how much money you’d need in savings and investments to spend $10,000 per month in retirement….
Retirement is something many of us dream about after years of hard work and diligent saving. One of the biggest questions that might come to mind as retirement approaches is, “How much do I really need to save to enjoy the lifestyle I want?” Specifically, you might be wondering how much money you’d need in savings and investments to spend $10,000 per month in retirement.
We’re here to help answer that question by breaking down the numbers, exploring different planning strategies, and addressing key factors that could affect your savings goal. From Social Security to inflation, sequence of returns risk, and more, we’ll guide you through the considerations to help you build a reliable retirement income. By the end of this blog, you’ll have a clearer picture of the steps needed to secure your retirement and achieve peace of mind.
Understanding Your Spending Needs
The first step is to determine your retirement spending goals. Let’s say you’ve worked hard, saved consistently, and want to spend $10,000 monthly in retirement. To achieve this goal, you’ll need to factor in Social Security, other income sources, and your savings strategy. For example, if Social Security benefits cover $6,000 of that total, you’ll need to find a way to generate the remaining $4,000 monthly. This is where personalized retirement planning becomes essential.
How Much Do You Need to Save?
To figure out how much to save, we can apply the 4% rule for retirement. This rule suggests that retirees can withdraw 4% of their retirement portfolio per year without depleting their savings over a 30-year retirement. It’s a good starting point, though not a one-size-fits-all solution.
Based on this rule; to generate $48,000 annually ($4,000 per month) after Social Security, you would need a retirement portfolio of roughly $1.2 million. This calculation assumes a 4% withdrawal rate. However, due to factors like market volatility and inflation, some experts recommend using a more conservative withdrawal rate, like 3% or 3.5%, which would increase the savings requirement to around $1.4 million.
Factors that Impact Your Monthly Budget
When planning to spend $10,000 per month in retirement, consider how factors like taxes, inflation, and market volatility will affect your financial security. Here’s a closer look at each:
Taxes: Whether you aim for a gross or net $10,000 can significantly impact your strategy. Funds from sources like a traditional IRA are taxed as ordinary income, while long-term capital gains from brokerage accounts might be taxed at a lower rate. Roth IRA distributions, on the other hand, can be tax-free, making your tax plan a key element in reaching your monthly income goal.
Inflation: Inflation gradually erodes purchasing power, making it essential to account for it in your retirement plan. A 3% annual inflation rate, based on a historical average, is typically used to project future expenses. This means that the $10,000 you aim to spend today will need to grow over time to maintain the same lifestyle. Personalized retirement planning can help you adjust for inflation and avoid underestimating your income needs.
Market Volatility and Sequence of Returns Risk: Market volatility can have a lasting impact, especially early in retirement. When you retire, a market downturn can reduce your portfolio’s value and make it challenging to sustain your desired income without overspending. This risk, known as sequence of returns risk, is why some retirees use a diversified approach to protect their income, such as combining “growth” and “safety” buckets.
Mitigating Sequence of Returns Risk
Sequence of returns risk refers to the potential loss of funds due to withdrawals during a market downturn, especially early in retirement. Imagine you’ve saved $1 million and are withdrawing 4% each year. If the market declines by 20% shortly after you retire, the impact could be lasting, as you’re drawing from a declining balance without time for recovery.
One effective way to combat this is through a two-bucket approach: a growth bucket and a safety bucket.
The growth bucket contains market-exposed investments that grow over time but come with some risk. This bucket can yield higher returns but should be left untouched during market downturns.
The safety bucket is for short-term needs, holding principal-protected assets that grow steadily. By drawing from this bucket during market lows, you avoid selling assets at a loss, preserving your growth bucket’s potential.
Balancing Your Retirement Goals with Lifestyle Needs
Personalized retirement planning isn’t solely about math. It’s also about aligning your savings strategy with your desired lifestyle. For instance, if you want to travel extensively in the first decade of retirement, you might initially need a higher budget. Many retirees anticipate a decrease in spending as they age, assuming they’ll eventually travel less. Adjusting your spending expectations over time can be a valuable approach to retiring comfortably.
Creating Your Peace of Mind Pathway
Retirement planning involves more than setting a savings goal. It’s a retirement checklist that includes investment planning, tax planning, and estate considerations. With a comprehensive and structured approach, you can optimize each part of your retirement to secure your peace of mind. Our Peace of Mind Pathway simplifies retirement planning into clear, actionable steps, allowing you to focus on your priorities, like family, travel, and personal goals. This pathway considers:
Investment Planning: Ensuring a well-diversified portfolio to balance risk and growth.
Tax Planning: Creating tax-efficient withdrawal strategies to minimize liabilities.
Healthcare Planning: Addressing potential medical costs and insurance needs.
Estate Planning: Protecting your legacy and ensuring your assets are distributed according to your wishes.
When to Start Thinking About Retirement
If you’re wondering, “Is it time to retire?” or “When should I retire?”, a good starting point is an analysis of your financial readiness, lifestyle goals, and health. Retirement planning is a personal journey, and having a strategy that adapts to your needs is vital to secure your retirement.
The Role of Professional Guidance
Every retiree’s situation is unique, which is why personalized retirement planning is essential. There’s no universal answer to questions like “What is the 4% rule of retirement?” or “How do I manage budgeting on social security?” Consulting a professional to help analyze your expenses, determine optimal withdrawal rates, and implement strategies to address risks like inflation and market downturns is a good start for many in retirement planning.
If you have some questions about how this may fit your situation, schedule a 15 min call with us on our website. If we can’t answer all your questions in just 15 minutes, we’ll guide you to the next steps to find the answers you need.
