Early retirement from full-time work may be a dream of yours and it can become a wonderful reality provided you make the right strategic choices at the right time. 65 is the average age for retirement in the US, but you can choose to retire at 62 and enjoy your life, if you invest money strategically.
If you are 62, then this is the specified age when you are eligible to collect Social Security retirement benefits. Social Security benefits are a significant source of income because the benefits are inflation protected which covers you for the rest of your life, but how and when to claim the benefits from social security can be little tricky. Though one can start accepting Social Security benefits at 62, however, it may be to your benefit to know that if you can manage to live without it for a few more years, you must do so as it will make a significant difference to your income.
Often, a lot of people get anxious and worried about running out of money. But the right decision based on accurate knowledge on when to claim social security benefits can help protect your income. For every year that you delay past your full retirement age (FRA) up to age 70, you get an approximate 8% increase in your benefit. Therefore, waiting a few years longer until 66 or even 70 to begin accepting Social Security benefits can boost the income to up to 30 % more. But in case, you opt-in to claim social security benefits at 62 or before FRA and continue to work earning income beyond the specified thresholds, then you may expect some reduction in benefits too. You should also base your decision of when to claim for social security benefits taking your health status, longevity and the retirement lifestyle you want into consideration.
It is also critical to assess if you want to begin receiving your social security benefits at 62 and at the same time continue working because your benefits will primarily be dependent on the amount you earn. Also, it is imperative to understand how work affects your social security benefits and how one can gain most out of it
Beginning Social security and getting benefits can also vary for all categories including singles, married couples and women and therefore you must ensure that you understand the pros and cons before claiming it.
In case of a married couple, you can claim benefits jointly and coordinate decisions. Keep in mind that you are aware of the spousal and survivor benefits before taking any decision. It is wise for a couple with similar incomes and ages to delay their claim to get maximum lifetime benefits whereas for couples with drastic differences in earnings can claim spousal benefit instead of claiming for their own. Last but not least, a couple may consider claiming social security early with shorter life expectancies.
So, in nutshell, if you are looking for a higher guaranteed social security income, it is better to delay social security at 62 and meanwhile consider using your savings to cover your retirement expenses.
Nearly every American aged 65 or older is eligible for Medicare however if you choose to retire at 62, you need to make sure that you have a health insurance (either through your employer or from a private insurance company) to take care of any emergency until Medicare eligibility sets in.
With the Affordable Care Act, you can get guaranteed health coverage for your pre-existing conditions without any extra charge. The health coverage premiums during this time can be slightly expensive depending upon various factors – such as age, location, past medical history, etc.
Remember to shop for an appropriate plan with additional health coverage because Medicare does not cover all health care costs. If you aim to retire at 62, it is also important to estimate Medicare expenses well in advance in your retirement budget to avoid last minute over-spending.
You can consolidate all your retirement accounts such as money invested in IRAs, 401(k)s and any other employer-sponsored plans into a single IRA account. Combining multiple accounts will enable you to manage investments, and at the same time, you can save a lot of time. Funds spread out across multiple accounts can become a hassle especially when you have to update records or add beneficiary details or to keep track of the money in your old retirement plans. Remember to ensure that you invest money in diversified portfolios to get maximum benefits and to keep the funds safe.
Remember that as per the tax rules, when you reach 70½, you are qualified to start required minimum distribution (RMD). Therefore, it will be easier for you to manage funds if you consolidate your accounts.
Also, it is a great idea to consult a retirement planner who can help you to figure out various ways to plan your retirement money efficiently.
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