05 Dec Can I retire early at 62? My wife thinks I’m nuts.

Q. Can I retire early at 62? My wife is 52 and earns $140,000 a year as the breadwinner. I make $42,000 a year in a physically demanding job. We have a $380,000 home with a $260,000 mortgage. Our two kids are in the last semesters of college and we will help them pay some student debt. I don’t have many wants. My estimated Social Security benefits are $1,460 per month at age 62 and 10 months. My wife thinks I’m nuts. Maybe! You opinion is appreciated.
— Ready to retire

A. We’re not going to weigh in on whether or not you’re “nuts,” but let’s look at what to consider before retiring early.

First, take a close look at where you stand.

Review both your retirement and non-retirement savings and consider how much additional money needs to be saved, if any, while you both continue to work, said Betty Thomas, a chartered financial consultant and certified financial planner with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

Also think about how long your savings will last once you’re both retired. Will it be enough to maintain your lifestyle over 30 years or more?”

“When you stop working, your contribution to the family budget goes from $42,000 to $17,000 with a reduced Social Security benefit,” Thomas said. “You still have bills to pay. The reduction in income impacts how much is saved going forward before your wife stops working.”

Another consideration is medical insurance, Thomas said.

By retiring at age 62, you would have three years before becoming eligible for Medicare. If you’re covered under your wife’s medical plan that is a huge benefit, but if not, the cost of buying medical insurance should be added into your budget, she said.

Then you have to take the long view on Social Security.

By taking benefits at age 62, the benefit will be permanently reduced.

“If you and your spouse have accumulated enough in savings that can sustain the family without you taking Social Security early, consider waiting,” Thomas said.

If your full retirement age is 67, your Social Security benefit is reduced 30% if taken at age 62. If you wait two additional years to age 64, it would be reduced by 20%. Waiting to age 65 is only a reduction of 13.3%.

Also, Thomas said, should you decide to return to work for any reason, your Social Security benefit would be reduced $1 for every $2 earned above the limit set by Social Security, which is $17,640 for 2019.

So are you nuts? There’s no rule that says you have to work until age 65 or 70.

“People are retiring earlier all the time,” Thomas said. “If all the boxes are checked – you have healthy savings – retirement and non-retirement accounts – that can sustain your lifestyle without working, living and medical expenses are low, there is an emergency fund to cover three to six months of expenses, and your family supports the idea – retire.”

Good luck!

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This story was originally published on Dec. 5, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.