Half of all Americans would like to retire at 60, but the most popular age to retire and begin receiving Social Security for American workers is 62. However, that may not be the best idea for many people, even if it seems like it is possible.
There are many reasons why this might be the case, but here are a couple of the biggest ones.
While it’s true you can begin receiving income from your Social Security as early as age 62, you do not qualify for Medicare until age 65 (other than if you become disabled, or for certain other special need cases). Retiring at 62 means you have a three year gap between the end of any health insurance provided or supplemented by your employer and the start of Medicare coverage. Of course, Medicare isn’t without its costs even after you are old enough to qualify.
That’s three years in your mid-sixties, a time when you are probably beginning to need more frequent health care than you did when you were younger. If you retire at 62, you’ll need to have enough income to cover all of your health-related needs (insurance, deductibles, copayments, etc.) for those three years – in addition to the rest of your regular ongoing living expenses.
Health care expenses may be enough, all by themselves, to make it necessary for you to delay retiring until a bit later. But that’s not the only negative effect on your income if you retire at 62.
You can choose to begin receiving your Social Security payments at 62, but those payments will be reduced because you started the payments before your official “full” retirement age of 66 or 67 (depending upon what year you were born). And the payments don’t increase when you later reach your full retirement age – they stay reduced forever.
If you’re working and married, retiring at 62 doesn’t just reduce the Social Security disbursements you can receive during your own lifetime – it also limits what your surviving spouse will be eligible to receive during their lifetime. If your husband or wife has had higher earnings (and associated higher contributions into Social Security), this may not matter. But if he or she earned less, the Social Security they “inherit” from you may significantly affect their lifestyle for as long as they live.
If you’re female, whether you are married or single, you are likely to need a larger income during your retirement years. Women tend to live longer than men, and that means additional years at the end of your retirement (when expenses will typically be highest due to inflation). Reducing your income from Social Security may make the difference between having enough to live comfortably and struggling financially during those final few extra years.
Deciding when to retire, and when to begin receiving Social Security, is not a simple black and white decision where one size fits all. What is best for one person or family may not be best for another. As with other parts of your retirement, it helps to have guidance from an informed financial professional when making decisions about your Social Security. That’s where people like James Holloway Sr. and the team at Texas Financial and Retirement can help.
Contact Texas Financial and Retirement today at firstname.lastname@example.org or 903-534-5477 and find out if you qualify for a complimentary initial visit. We’ll examine what financial resources you have acquired and expect to receive in the future, then ask about your goals and dreams for retirement. Together we can assist in preparing a personalized retirement plan to help you work on maximizing your income during retirement and minimizing the tax burden on any heirs you may have.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Texas Financial and Retirement, Inc. are not affiliated companies. Investing involves risk, including the potential loss of principal.