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 July 15, 2024
Radon and Murs discuss whether to take Social Security at age 62 or wait until the full retirement age of 67. This is one of the most frequent and challenging questions they encounter from clients. They emphasize that the decision involves multiple factors and cannot be answered by simply searching online. Through a detailed example featuring their colleague Taylor, they explore the considerations that influence this significant choice.
Retirement planning is a multifaceted and often complex process, especially when it comes to deciding the right age to start drawing Social Security benefits. This blog aims to dissect the pros and cons of taking Social Security at 62 versus waiting until 67, using insights from a detailed financial planning podcast discussion.
Retirement planning is a multifaceted and often complex process, especially when it comes to deciding the right age to start drawing Social Security benefits. This blog aims to dissect the pros and cons of taking Social Security at 62 versus waiting until 67, using insights from a detailed financial planning podcast discussion.
Introduction to the Decision
Retirement is a significant milestone, and deciding when to start drawing Social Security benefits is a critical part of that journey. Social security benefits can begin as early as age 62 or as late as age 70. The later the begin date, the higher the benefit amount. For that reason, the choice of when to begin benefits is a common dilemma faced by many. Each option has its own set of advantages and potential drawbacks, and the best choice depends on individual circumstances, financial goals, and life expectancy.
The Scenario
Let’s consider a scenario where a couple, Jim and Jane, are both 61 years old and planning to retire at 62. They each earn $150,000 per year, have prioritized saving for retirement, and as such, have managed to accumulate substantial assets in their retirement accounts. Their primary question is whether to start taking Social Security benefits at 62 or to live off their savings and wait until their full retirement age of 67.
Understanding Social Security Benefits
Social Security benefits are calculated based on your highest 35 years of earnings. The Social Security Administration (SSA) provides an online tool where individuals can view their estimated benefits at different retirement ages. For Jim and Jane, their estimated benefits at full retirement age (67) are $3,800 per month each.
Financial Considerations
Income Needs and Expenses: Jim and Jane’s current monthly expenses are $8,000, which includes living expenses, travel, and leisure activities. Their home is paid off, simplifying their financial needs somewhat.
Retirement Savings: Both have IRAs worth $750,000 each, making a total of $1.5 million in retirement savings. They are also contributing the maximum allowable amount to their 401(k) plans.
Social Security at 62 vs 67: If they start taking Social Security at 62, their benefits will be reduced by approximately 30%, resulting in around $2,660 per month each.
Analysis of Different Scenarios
Taking Social Security at 62
Immediate Income: Starting benefits at 62 provides immediate income, reducing the need to draw down their retirement savings.
Reduced Benefits: The benefits are reduced by 30%, impacting the total amount received over their lifetimes.
Impact on Assets: By starting benefits early, Jim and Jane can preserve more of their retirement savings. However, the lower monthly benefits could result in less overall income if they live a long life.
Waiting Until 67
Higher Monthly Benefits: Waiting until 67 increases their benefits to $3,800 per month each, providing a more substantial income.
Drawdown of Assets: They will need to rely on their savings to cover expenses from 62 to 67. This could significantly deplete their retirement accounts.
Long-Term Impact: Higher benefits from 67 onward can provide more financial security in later years, but this assumes they live long enough to benefit from the increased payments.
Detailed Financial Projections
Using financial planning software, we can project the impact of each option on Jim and Jane’s retirement assets:
Retiring at 62 and Taking Benefits at 62:
Initial drawdown from savings to supplement reduced Social Security benefits.
By age 90, their projected net worth is $3.1 million, assuming no major unforeseen expenses or market downturns.
Retiring at 62 and Waiting Until 67:
Larger drawdown from savings to cover expenses until 67.
By age 90, their projected net worth is $2.9 million, slightly less than if they had taken benefits at 62.
Waiting Until 70:
This option maximizes Social Security benefits but requires substantial drawdown from savings until benefits start.
By age 90, their projected net worth is $2.8 million, the lowest among the three options.
Holistic Approach to Decision Making
When deciding on the optimal age to start taking Social Security benefits, it is crucial to consider several factors:
Life Expectancy: If there is a family history of longevity, it might make sense to delay benefits to maximize lifetime income.
Current Health Status: Poor health might favor taking benefits earlier to ensure some benefits are received.
Retirement Lifestyle: Desired lifestyle and spending patterns during retirement play a significant role in this decision.
Tax Implications: Social Security benefits are taxable, and the timing of withdrawals can impact overall tax liability.
Other Income Sources: Availability of other income sources, such as pensions or rental income, can influence the decision.
Conclusion
The choice between taking Social Security at 62 versus waiting until 67 is not a one-size-fits-all decision. For Jim and Jane, starting benefits at 62 appears to be slightly more advantageous in terms of preserving their retirement assets. However, this decision is highly individualistic and should be made based on a comprehensive analysis of personal financial situations, health, and retirement goals.
Financial planning tools and consultations with financial advisors can provide valuable insights and help make an informed decision. Ultimately, the goal is to ensure a comfortable and secure retirement, with Social Security benefits complementing overall financial plans effectively.
For personalized advice and detailed financial planning, consider consulting with a retirement planning expert. Understanding the nuances of Social Security and integrating it into a broader financial plan can significantly impact the quality and security of your retirement years.
By considering the various factors and projections discussed, you can make a more informed decision about when to start taking your Social Security benefits. This comprehensive analysis should help you weigh the pros and cons and choose the best path for your unique situation.
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.