Why Retiring at 62 Might Be the Most Expensive Decision You Ever Make

Are you planning to retire around the age of 62? If so, you won’t be alone. According to the 2024 MassMutual Retirement Happiness Study, both retirees and pre-retirees see the age of 63 as a perfect retirement age – and the average actual retirement age is very close to that, at 62. (It’s probably not coincidental that 62 is also the earliest age at which you can claim your Social Security benefits.)

But should you join this crowd and retire at or around 62? There are some good reasons to think twice before doing so. Here are some.

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Social Security concerns

Let’s start with Social Security. As you probably know, each of us has a “full retirement age” of 66 or 67. If we claim our benefits earlier than that, checks will be smaller – but we’ll receive more checks, in total. If we delay beyond our full retirement age, our benefits will grow by about 8% annually, up to age 70.

By the way – various studies have found that for most (but not all) people, the best age at which to claim Social Security is 70 to maximize total benefits. If you maximize your benefit, an added plus is that all future cost-of-living adjustments (COLAs) will also be maximized.

If you stand a chance of living a longer-than-average life, you’ll get more out of Social Security by claiming your benefits as late as possible. If your health isn’t great, or many relatives have died fairly young, claiming early can make good sense. Just think through the question of when to claim your benefits very carefully.

Note, too, that while it’s not true that Social Security will soon be unable to pay beneficiaries at all, the program _is _facing a shortfall. If nothing is done to strengthen it, Social Security’s trust funds’ surplus will run out within a few years, which will result in benefits shrinking to about 77% of the current amount owed to beneficiaries.

Longevity risk

Few of us have any idea how long we’ll live. We’re probably not planning to make it to age 95 or 100, but plenty of people will. That probably seems like a _good _thing, as you’ll be able to watch the 85th season of The Simpsons and you may be able to teleport by then, too.

But there’s a problem. If you saved up a sizable nest egg to support you throughout retirement and you retire at age 62, living to, say, 95 means it will have to support you for 33 years! That’s a tall order – especially if inflation has cut the purchasing power of your dollars by half or more, which is extremely possible, if not likely, over 25 to 35 years.

When retiring at 62 does make sense

Clearly, it can be risky to retire very early, as there will be many unpredictable years ahead. But for some people, it may be fine. If your nest egg is quite large, for example, and you can handle significant inflation and potentially big medical bills, you may be able to swing it.

If you’re in poor health and have enough socked away to support you for at least your expected lifespan, retiring early is likely a good move, enabling you to enjoy some work-free years.