Retiring Early? Is it Feasible Today?
People are living longer, and it wasn’t so long ago that “retiring early” was a popular thing to do. But times are different, and today, many individuals are choosing to work longer. Some miss the structure of a daily schedule or want the sense of satisfaction or challenge that comes from working; and some people need to supplement their retirement income to maintain a comfortable lifestyle or make ends meet. There is also a surplus of older workers in the labor force because of a tighter labor market.
But if you choose to retire (or semi-retire) at age 62 and begin withdrawing from your 401(k), IRAs or other retirement savings, take note that you’re not required to make Social Security withdrawals. Many retired individuals wait until they reach age 67 (sometimes called “full or normal retirement age”) so they can receive their full allotment of social security.
According to the Social Security Administration’s website (https://www.ssa.gov/planners/retire/1960.html), for those born in 1960, the age to receive full social security benefits is 67. If you retire early, for example, at age 62, you only receive 70% of your earned benefits.
Source: https://www.ssa.gov/planners/retire/retirechart.html.
How your birth year may impact Retirement Age:
| Year of Birth * | Full Retirement Age |
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943 -1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
| *If you were born on January 1st of any year you should refer to the previous year. (If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month.) | |
Depending on your age, your Social Security benefits may be reduced:
| If you start getting benefits at age* | And you are the: Wage Earner, the Retirement Benefit you will receive is reduced to | And you are the: Spouse, the Retirement Benefit you will receive is reduced to |
| 62 | 70.0% | 32.5% |
| 63 | 75.0 | 35.0 |
| 64 | 80.0 | 37.5 |
| 65 | 86.7 | 41.7 |
| 66 | 93.3 | 45.8 |
| 67 | 100.0 | 50.0 |
This is a partial representation by age. For details, visit https://www.ssa.gov/planners/retire/1960.html.
Still, if your goal is to retire early, there are strategies you can embrace.
According to Nancy L. Anderson, CFP ™ and writing for Forbes.com, hopeful retirees can tap into other retirement plans first (such as a 401(k)) before making Social Security withdrawals. “This enables you to preserve more of your Social Security nest egg for later years,” adds Mark Richter, CEO of First United CU.
Also, try to pare down debt and have your home paid in full before retiring. At First United CU, we suggest you consider refinancing into a shorter term or even via a fixed-rate Home Equity Loan to help pay off your home more quickly.
No matter your stage in life or views on retirement, the experts concur: the key to retiring is to save as much as you possibly can. Saving may include investing in your 401(k), especially if your employer matches any deposits. “This is money you don’t want to leave on the table,” says Richter. “There are also other savings strategies that make sense, such as investing in an IRA or using a Health Savings Account.”
At First United CU, we’re here to help you realize your life goals, which, depending upon your situation, may include early retirement. Call us at 616.532.9067 if you need help with planning or making investments in an IRA.