Age 62 may not seem like an important milestone, but if that's the age you'll be reaching this year, it could actually be a pivotal point on the way to retirement -- or perhaps even the year you choose to bring your career to a close. Here are a few things to know if you're turning 62 in 2021.
1. You can sign up for Social Security -- but that doesn't mean you should
Age 62 is the earliest age to file for Social Security benefits, and it's also the most popular age to sign up among eligible seniors. But just because you're allowed to claim your benefits at 62 doesn't mean it's a good idea.
You're entitled to your full monthly benefit, based on your personal earnings history, once you reach full retirement age, or FRA. FRA depends on your year of birth, and if you're turning 62 this year, it means you were born in 1959. In that case, you won't reach FRA until 66 and 10 months, so if you claim benefits at 62, you'll reduce them by nearly 30%. That's a large hit to lock in for the rest of your life.
Even if you're eager to retire on the early side, it pays to delay your Social Security filing if you can. You may be able to achieve that goal by working part-time once you leave your main job, or by dipping into your IRA or 401(k) plan instead of relying on Social Security income to pay your bills. You're allowed to take penalty-free withdrawals from one of these accounts beginning at age 59 1/2, so if you're already 61, you're fine to dip in.
2. You won't be eligible for Medicare
If you're thinking of retiring at age 62, you should know that if you go that route, you'll need to figure out health coverage. That's because Medicare eligibility doesn't begin until age 65.
Now you may be thinking you'll fall back on COBRA so you can retain your employer health coverage. But that may not work out as well as you'd think. For one thing, COBRA can be prohibitively expensive because you're losing the employer subsidy you may have been used to for your insurance premiums. Secondly, you can only stay on COBRA for 18 months, so if you're first turning 62 this year and are retiring, you'll still have a coverage gap until you can sign up for Medicare.
Make sure to research your healthcare options thoroughly if you intend to retire well before your Medicare coverage can kick in. Buying private insurance is, of course, an option, but it may be a more costly one than you're bargaining for.
3. You may want to work a bit longer
Some seniors aim to retire at 62, but if you do, you could wind up with many years of retirement ahead of you. And while that's a good thing in theory, it can prove challenging from a financial perspective, because the more years of retirement you need to pay for, the more likely you'll be to deplete your nest egg in your lifetime.
Life expectancies have been on the rise in recent years, and if you're healthy and have a family history of longevity, you'll need to prepare for a longer retirement. As such, it could pay to stay in the workforce beyond age 62.
As you prepare to turn 62, make sure to keep the above points on your radar. That way, you'll be better positioned to make the most of 2021 and avoid decisions you ultimately regret.