The retiring age has been 65 traditionally for years in America. Now, the fact that Social Security is available for those retiring at 62 and it has become a powerful inducement for those who want early retirement. It would be wise to consider all the aspects of early retirement before leaving the work force for good.
Firstly, what most people don't realize is that though Social Security benefits are available at 62, the amount you receive is reduced. It is 25% smaller than the amount you would have received by retiring at 66 and 43% smaller than what you would have got by retiring at 70.
AdvertisementEarly retirement is a challenge where it comes to dealing with health care insurance. Medicare starts only when you are 65 so you have 3 years to go on your own health insurance. COBRA fills the gap for 18 months after leaving a job, though you are now responsible for paying the premiums which can be pretty steep at 62. This is a pretty heavy financial drain on your finances. The amount given by social security for the surviving spouse is also much lower.
Retiring at 62 and before 65 can also mean you are giving up all that you have worked for just before you reach the peak. When you climb the corporate ladder, this is a stage in life when financial growth is at the highest level. Early retirees lose benefits. employers encourage early retirement to cut these costs and gain the higher health care packages they would have to pay for.
If you want to retire early then it is advisable to do so well before your 60's as you could invest your retirement funds sensibly and work at your pace and time to make yourself comfortable well before retirement.
Social security does play a key role in financial stability after early retirement, though retirement experts give an insight in making use of an IRS rule to your advantage. The whole point is to keep your family comfortable and you stress free after retirement.
Motley Fool, Social Security Administration, August 2014
Hannah Punitha (IRDA Licence Number: 2710062)