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3 Questions You Need to Answer Before Deciding to Retire at 62

By Katie Brockman - Nov 20, 2019 at 8:15AM

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For some people, early retirement could be a smart decision. Are you one of them?

For some people, their careers are their identity. They're passionate about their jobs, and can hardly imagine retiring. For others, though, retirement can't come soon enough.

If you're among those yearning for the day you can finally start living a life of leisure in your golden years, you've probably given some thought to the question of when that day should come. Although you can technically retire whenever you choose, one of the more popular retirement ages in America is 62 -- primarily because that's when you become eligible to start collecting Social Security benefits.

If you're not properly prepared for it, such an early retirement could spell trouble, but if you are, it could be one of the best decisions of your life. To figure out whether retiring at 62 really is the best choice for your situation, you'll want to answer these three questions.

Man and woman sitting in lounge chairs on the beach

Image source: Getty Images

1. Are you financially prepared enough?

Early retirement can be a blessing and a curse. Although it means you'll get to spend more years at your leisure, it can put a twofold strain on your finances. Not only will you have less time to save and invest for retirement, but you'll also need a larger nest egg to cover the additional years of expenses. If your savings are light, it might be extra tough to afford the retirement lifestyle you want if you chose this path.

You could, of course, file for Social Security at 62 to help make ends meet. However, when you begin claiming benefits before your full retirement age (FRA) -- which for anyone who hasn't retired yet is from 66 to 67 -- you'll receive smaller checks each month. If your FRA is 67 and you start taking benefits at age 62, your payments will be reduced by 30% every month for the rest of your life. So if, for example, your full benefit amount would be $1,500 per month and your FRA of 67, you'll receive just $1,050 per month if you claim at 62.

If you're planning on retiring and claiming Social Security at 62, you'll need to make sure you can afford to do so. Take an honest look at your nest egg to see whether it could potentially last several decades. Of course, it's tough to predict exactly how much you'll spend in each year of retirement, but if you only have, say, $100,000 set aside, there's a good chance your savings won't last long as long as you'll need them to.

You can also find out how much you should expect to receive from Social Security by creating a my Social Security account. The government will tell you what your future benefits picture look like -- at full retirement age -- based on your real earnings so far. Knowing this number will help you determine much more you'll have to save on your own.

2. Have you thought about how you'll spend all your free time?

You probably have what feels like a long list of all the things you can't wait to do once you're retired and have the free time to do them. But consider this: About one-third of today's 65-year-olds can expect to live into their 90s or beyond, according to the Social Security Administration. That means if you retire at age 62, there's a fair chance you will spend at something like three decades in retirement.

That's a lot of days you'll need to fill. If you don't have a plan for how you're going to spend all that free time, you could end up bored and miserable.

Of course, you don't need a detailed schedule for every minute of retirement. But you should definitely have worked on some big-picture ideas. For instance, is there a cause you're passionate about that you could volunteer your time to support? Would you want to work part-time? Maybe you have several hobbies you want to master. Whatever suits you, the key is to make sure you have an idea of how you want to spend a good portion of your time so you don't end up regretting the decision to retire early.

3. How good is your health?

One of the biggest challenges of retiring at 62 is figuring out how you're going to pay for healthcare expenses. You won't be eligible to enroll in Medicare until you turn 65, so if you lose your health insurance when you leave your job, you'll need to find coverage elsewhere. If you gamble and go without it, you risk losing a good chunk of your retirement money -- or all of it -- to major medical expenses.

There are a few options for buying health insurance before you're eligible for Medicare. First, you can take advantage of COBRA coverage, which allows you to remain enrolled under your former employer's insurance plan. There are two significant downsides to COBRA, however: Your premiums will be much more expensive than those you paid as an employee, and you're only allowed to stay on the plan for 18 months. So if you start using it at 62, you'll need to find new insurance by the time you turn 63-1/2.

Another option is to enroll in a healthcare plan in the Affordable Care Act marketplace. Premiums and deductibles vary widely based on what's available in your area and what type of coverage you're looking for, but these plans are typically more expensive than what you paid for insurance through an employer. And if you're not in the best health, you'll likely be paying even more.

You don't need to be in the best shape of your life to retire at 62, but being in at least good health can minimize healthcare expenses. Your money already has to last a long time if you retire early, so the last thing you want is to drain your retirement fund on healthcare costs right off the bat.

As naturally tempting as it might seem, retiring at 62 isn't right for everyone. Before you decide to do it, take an honest look at your health, finances, and retirement plans to determine whether it's really right for you.

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