You Don’t Have to Start Social Security Just Because You Retire
Just because you retire at 62, it does not mean you have to start collecting Social Security at 62. You will get a larger benefit by waiting to collect Social Security until you are older, and there are some unique strategies that married couples can use to get more out of their combined benefits.
Contrary to popular belief, using your own savings for income first while delaying your Social Security can be more tax-efficient, and net of taxes, it can make your personal money last longer.
Many retirees say their biggest fear is running out of money. Social Security provides inflation adjusted income for as long as you live. Married couples who make strategic choices about how and when to collect benefits can receive hundreds of thousands more in benefits over their joint lifetimes than those who collect early with no strategy. You can use a Social Security calculator to see the difference between a good claiming strategy and a poor one.
Medicare Kicks In at 65
Medicare benefits don’t start until you turn 65. If you retire at 62 you’ll need to make sure you can afford adequate health insurance coverage until age 65 when Medicare benefits begin.
Also keep in mind, Medicare does not cover all health care costs, so many people purchase additional health coverage to supplement their Medicare benefits. Get quotes on your health insurance costs so you can build this expense into your retirement budget.
Consider Consolidating Retirement Accounts
If you have money in IRAs, 401ks or other employer sponsored plans, you’ll want to think about consolidating these investments into one account. Many people believe their money is safer when it is spread out across many different firms. This should not be a factor in the decision. When you use a large well-known financial custodian than there is no reason to hold money in several other places too.
At age 70 ½ tax rules require you to start taking distributions from your retirement accounts, and it is much easier to follow these rules when your retirement accounts have been consolidated.
Also, keep in mind, even though you don’t have to take money out of your IRA or other retirement account until age 70 ½, for tax reasons, if you retire at 62 it may make sense to start taking withdrawals before you are required to. It will depend on your marginal tax bracket and your other sources of income. You may wish to work with a retirement planner that specializes in helping people decide on the most tax efficient way to use their retirement money.
Next: How to Retire at 65