Age 62 may not seem like an important milestone, but if it’s the age you’ll reach this year, it could be an important point on the road to retirement – or maybe even the year you choose to pursue your career. n close. Here are some things to keep in mind when you turn 62 in 2021.
1. You can sign up for Social Security – but that does not mean you have to do it
Age 62 is the earliest age to apply for Social Security benefits, and it is also the most popular age to enroll among competent seniors. But just because you can claim your benefits at 62 does not mean it’s a good idea.
You are entitled to your full monthly benefit, based on your personal earnings history, once you have reached full retirement age, or FRA. FRA depends on your year of birth, and if you turn 62 this year, it means you were born in 1959. In that case, your FRA only reaches 66 and 10 months, so if you claim 62 benefits, you will reduce it by almost 30%. It’s a big hit to include the rest of your life.
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Even if you would like to retire at the beginning, it is worthwhile to postpone your application for social security if you can. You could possibly achieve this by working part-time as soon as you leave your main post, or by going into your IRA or 401 (k) plan instead of relying on Social Security income to pay your bills. You may take penalty-free withdrawals from one of these accounts from 59 1/2, so if you are already 61, you can do so well.
2. You are not eligible for Medicare
If you are thinking of retiring at age 62, you need to know that you need to find health coverage if you follow the path. This is because Medicare is only eligible for 65 years.
Now you may think that you will fall back on COBRA so that you can maintain your employer’s health coverage. But it may not work as well as you might think. First, COBRA can be excessively expensive because you lose the employer subsidy to which you previously used your insurance premiums. Second, you can only stay on COBRA for 18 months, so once you turn 62 and retire, you will still have coverage until you can sign up for Medicare.
Make sure you thoroughly research your healthcare options if you plan to retire well before you can start medical coverage. Of course, buying private insurance is an option, but it can be more expensive than what you negotiate.
3. You may want to work a little longer
Some seniors plan to retire at 62, but if you do, you could be ahead with many years of retirement. And while this is a good thing in theory, it can be challenging from a financial perspective, because the more years your retirement has to pay, the greater the chance that your nest egg will be depleted in your lifetime.
Life expectancy has increased over the past year, and if you are healthy and have a long family history, you need to prepare for a longer retirement. As such, it may be worthwhile to stay outside the age of 62 in the workforce.
While preparing to turn 62, keep the above points on your radar. This way, you will be better positioned to make the most of 2021 and avoid decisions that you ultimately regret.