Some people turn 62 and aren't anywhere ready to kick off their retirement. But by the time your 62nd birthday rolls around, you may be well into the process of planning your workforce exit.
Either way, it's important to understand the impact of being 62 as it relates to different retirement accounts and benefits. If you'll be reaching age 62 in the new year, here are some important points to keep in mind.
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1. You can claim Social Security -- but you'll slash your monthly benefit
Once you turn 62, you're allowed to sign up to collect Social Security. However, if you file for benefits at age 62, you'll generally reduce them on a permanent basis.
You're entitled to your complete monthly Social Security benefit, based on your personal wage history, once you reach full retirement age (FRA). If you're turning 62 in 2024, it means you were born in 1962 and therefore have an FRA of 67.
If you decide to move forward with a Social Security claim at 62, you'll slash your monthly benefit by 30%. So think about whether that's a hit you can afford.
If you have a lot of savings, it may not be such a problem. But if your nest egg isn't particularly robust, then you may want to hold off on filing for Social Security.
To be clear, if you're looking to retire at age 62, it may be possible to do so without signing up for Social Security. If you have a decent-sized nest egg, you may be able to live off of your savings and put off filing for benefits so they can grow.
But if you're going to claim Social Security at 62, be mindful of the lifelong reduction that will generally ensue. The only way your benefits won't be reduced permanently is if you undo your filing within a year and repay all of the money you collected.
2. You can take IRA or 401(k) withdrawals without worrying about a penalty
If you've been funding an IRA or 401(k) plan for years, you may be happy to know that if you're turning 62 next year, you're already old enough to take withdrawals from your savings without incurring a penalty. Early-withdrawal penalties generally apply if you tap an IRA or 401(k) before age 59 1/2. But if you're already beyond that point, that money is yours to access as you please.
However, if you won't be retiring in 2024, then it pays to do your best to leave your savings alone, as you might need that money once you no longer have a paycheck from work. If you're planning to continue to work and are thinking of raiding your IRA or 401(k) to, say, go on vacation, you may want to make alternate plans.
3. You're too young for Medicare coverage
It may be that you're planning to retire in 2024 because you'll be 62 and can therefore access your Social Security benefits. But at 62, you'll be too young to sign up for Medicare.
Eligibility for Medicare doesn't begin until age 65. And if you retire and give up your health insurance, you might end up spending quite a lot of money to secure healthcare coverage.
If you're looking to retire next year at age 62 but your spouse intends to keep working, enrolling in their health plan may be feasible. Either way, research your options and costs before making your decision.
Age 62 could end up being a big one in the grand scheme of your life. Keep these essential points in mind, especially if you're contemplating a 2024 retirement.
