A lot of people choose to retire in their mid to late 60s, when they're not only eligible for Medicare, but can also claim their Social Security benefits in full. But what if you're in your 50s or early 60s, and you realize you want to retire sooner than that? Here are a few things you can do to allow you to comfortably move up your retirement date.
1. Ramp up your savings rate
The more money you have set aside in your retirement accounts, the easier it'll be to leave the workforce. If you're 50 or older, you have an opportunity to make "catch-up contributions" to your IRA or 401(k). These essentially increase the cap on your annual contributions, allowing you to boost your savings in a tangible way.
Say you've just turned 57 and you decide you really want to retire at 62. Let's further postulate that you're sitting on $700,000 in your retirement accounts already -- not bad. If, over the ensuing five years, you max out your 401(k) contributions to the current limit of $26,000 annually -- $19,500 in standard contributions plus the $6,500 allowed in catch-up contributions -- and your retirement plan delivers a fairly conservative 5% average annualized return, you'll wind up with about $1,046,000.
2. Access your Social Security benefits sooner
If your wait to file for Social Security until you reach your full retirement age (FRA), you'll be entitled to what the government defines as your full monthly benefit based on your earnings history. For those of us who haven't yet retired, FRA is going to be either 66, 67, or 66 plus a number of months, depending on your year of birth.
But you don't have to wait until FRA to claim your benefits. You can sign up as young as 62, and doing so could be your ticket to an earlier retirement.
Of course, there's a danger in filing for Social Security early. Doing so will reduce the size of your monthly benefit on a permanent basis. But if you have a pretty healthy balance in retirement accounts, then you may be in a solid position to claim your benefits sooner and leave the workforce at a younger age.
3. Make plans for a modest lifestyle
The more you're willing to reduce your spending in retirement, the more feasible it'll be to end your career early. Think about what's most important to you. For example, would you prefer to retire on the early side and move into a more modest home, or would you rather keep your larger property even if that means you have to plug away at your job for several more years?
And it's not just housing that you may want or need to downgrade to get to your golden years sooner. You may also need to get on board with spending more of your time on less expensive pastimes like gardening, hiking, or volunteering rather than on hobbies like playing golf or traveling. But if retiring early is important to you, those may be lifestyle adjustments you feel are worth making.
Some people plot out a retirement date while they still have decades to go in their careers, and then stick to that plan. But if you're inspired to speed up your timeline, there are steps you can take to help make it financially feasible. While there's nothing wrong with working until your mid to late 60s or beyond, it's not for everyone, and with the right choices and strategies, you can enjoy the freedom that comes with retiring on the early side.