You might already know that you can begin taking Social Security benefits at age 62 – but should you? For starters, taking Social Security at the lowest possible age means a lower monthly benefit amount. But retiring at 62 also means planning for a longer retirement, and with lifespans longer than ever, you might find your savings stretched thin by the time you get into your eighties. Figuring out how to retire at 62 means taking a close look at your retirement budget, your savings and your income to make sure that it’s realistic and doable. Whether you’re five years away from retirement or 30, here’s what you need to know about retiring at 62 and having enough money to live comfortably.

What to Consider

If you’re set on retiring at age 62, there are a few important questions to ask yourself first. Here are some of the most important things to weigh in the balance:

• How much money you’ll need to cover your monthly expenses

• How much income you can expect from a 401(k), individual retirement account, pension, taxable investments and cash savings

• What kind of lifestyle you’d like to have in retirement

• Whether you’ll continue working on a part-time basis or start a side hustle or business

• How you’ll pay for medical expenses until you become eligible for Medicare

• Your overall health and anticipated life expectancy

• What you have for long-term care and life insurance coverage

• Whether you’re interested in leaving a financial legacy for children, other loved ones or a charity

The goal is to get a sense of how financially prepared you are to retire at age 62 and whether your plan is achievable, based on how much you’ll have saved and what you expect to need.

Anticipating Healthcare Needs

For many seniors, healthcare is one of the largest expenses you’ll contend with. If you’re retiring at age 62, it’s important to keep in mind that you can’t get Medicare until age 65. That leaves a three-year gap in which you’ll have to either purchase health insurance, which means paying premiums, or pay out of pocket.

Assuming you stay healthy or you have a lot of savings in a health savings account (which offers tax-free withdrawals for qualified medical expenses), that might not be too concerning. But if you have a chronic health issue or your spouse does, medical bills could quickly eat into your savings.

Planning Retirement Withdrawals

Another important question to ask when planning how to retire at 62 is how much of your income you can draw down each year. A rule of thumb for retirement withdrawals is the 4% rule. This rule dictates withdrawing 4% of your retirement savings annually to be able to have enough money for the rest of your life.

Let’s assume you’re interested in how to retire at 62 with $500,000 saved and you expect to live 30 years in retirement. If you follow the 4% rule, you’d have to cap your annual withdrawals at $20,000 to avoid running out of money. That comes out to just under $1,700 per month. To make that number work, you may have to do some significant reshuffling of your budget and lifestyle. Of course, that number doesn’t include what you might get from Social Security.

Something else to keep in mind is in which order it makes the most sense to tap retirement assets. Generally, you’re better off starting with taxable brokerage accounts first before moving on to tax-advantaged accounts, such as a 401(k) or traditional IRA, leaving tax-free Roth accounts last so those can continue growing and accumulating interest. By minimizing taxes as much as possible, you can keep more of your retirement income.

Social Security Benefits and Retiring at Age 62

If you’re considering retiring at 62, it’s likely that Social Security is one of your primary concerns. That’s because 62 is the first year you’re eligible to receive Social Security benefits, but your benefit will be lower than if you’d waited longer to start receiving those benefits.

Normally, you’d need to reach your full retirement age, which for most people is 66 or 67, to qualify for the full monthly benefit amount. And to get the largest possible benefit you’d need to wait until age 70. Taking benefits at age 62, or at any time between 62 and your full retirement age would reduce your benefit amount.

The amount of the reduction depends on the year you were born. For example, if you were born in 1960 or later, taking Social Security benefits at age 62 would reduce your monthly benefit by 30%. If you’re married and spousal benefits are also being paid, those benefits would be reduced by 35%. So for example, if you’re anticipating a $1,000 monthly Social Security payment and your spouse is expecting $500, your benefits would be reduced to $700 and $325, respectively. This Social Security calculator can tell you what you can expect to receive, based on your age and when you begin taking benefits.

Going from $1,500 per month in expected benefits to $1,025 could put a squeeze on your retirement budget if you have fewer assets to fall back on. For example, if you didn’t save as much in your employer’s 401(k) as you would have liked or you only had an IRA to fund, then your nest egg might be on the smaller side. That could make it harder to stretch a reduced Social Security benefit.

Should You Delay Social Security Instead?

The flip side of the Social Security coin is that waiting to take benefits can work in your favor. You can delay taking benefits up until age 70, which would increase your benefit amount by 132%.

That’s a nice income boost you could enjoy for retirement, but that scenario assumes that you won’t need those benefits for some time. (It’s also a bet that you’ll live long enough that the increased benefit offsets the years you went without Social Security checks.) If you’re set on retiring at 62, you’ll need to be sure you have enough money to cover your expenses so that delaying Social Security works for you, not against you.

You could, for example, take on a part-time job or start a business to make extra money. But whether you want to do this or not may depend on the kind of lifestyle you’re hoping to have in retirement. If you’re ready to spend time indulging in neglected hobbies or simply relaxing, then continuing to work in some form may not be high on your priority list.

It’s also important to understand how earning income in retirement can impact your Social Security benefits. If you have reached full retirement age (66 or 67) your benefits will not be penalized regardless of how much you earn. However, your benefits could be reduced if you haven’t reached full retirement age and you earn more than a certain amount. In 2020, your benefits will be reduced by $1 for every $2 you earn above $18,240. Your benefits will be reduced by $1 for every $3 you earn above $48,600 (assuming you reach your full retirement age in 2020).

If you’re married, you and your spouse might consider splitting the difference on Social Security. For example, one of you could take benefits at age 62 while the other waits until full retirement age or even delays benefits to age 70. Running all the numbers can help you decide which may work best for stretching your retirement dollars.

The Bottom Line

There’s no secret formula for retiring at 62 and living a comfortable lifestyle. It all comes down to saving consistently and planning thoroughly beforehand to ensure that you’ll have enough money. Social Security is just one part of the picture but it’s an important one. Weighing the pros and cons of taking Social Security at age 62 can help you decide if it’s the right move.

Tips for Investing

• Consider talking to a financial advisor about whether you’re financially prepared to retire at 62. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.

• If you’re hoping to retire at 62, it’s important to keep a close eye on your investment portfolio. Consider revisiting your portfolio at least once per year to rebalance and harvest tax losses if you’re not doing so already.

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