The lure of early retirement is enticing, there’s no doubt about it. A 2015 study by the Boston College’s Center for Retirement Research shows us that the average retirement age for men is 62, and for women is 64. (1) But just because you can start tapping into your Social Security benefits at 62 doesn’t mean you should. Why not? Because statistics show that 55% of retirees will not be able to cover basic living expenses as they move through their golden years. (2) If you’ve already taken the plunge into retirement, it’s not too late to make some changes. Take a look at these five signs that you retired too soon:
1. You Aren’t Fulfilled
Maybe you had a retirement bucket list with visions of joyful relaxing, time to conquer goals and do the things you never had time to do when you were working. But now that you have all this time and freedom on your hands, you find yourself twiddling your thumbs. You may think you are the exception rather than the rule, but the truth is that 30% of retirees would gladly re-enter the workforce if a job became available. (3)
Going back to work won’t just fill your time, it offers valuable benefits that you can’t ignore:
- More time to accumulate savings
- More years to apply towards Social Security which could result in a larger benefit amount
- Health insurance coverage through your employer
- Purpose and identity
- Stronger mental and physical health (4)
In the grand scheme of things, retiring at 62 compared to 66 may not seem like that big of a deal, but working four years longer could lower your risk of mortality by 11% (5) and boost your savings to carry you through the rest of your retirement.
2. Your Expenses Keep You Up At Night
While there is no one size fits all magic amount that will pay for your retirement years, the average cost to fund retirement in America is over $700,000. (6) That number will vary based on your health, location, debt load, and other lifestyle factors. If you are worried your savings will not last at your current spending rate, working even a few years longer and adjusting your budget could alleviate some of your stress.
Housing and debt are likely your highest line items in retirement. Extending your retirement could let you save at a faster rate and decrease more of your debt, giving you added peace of mind that your nest egg will last as long as you need it.
3. You Have A Healthcare Headache
If you decided to retire prior to turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.
For example, a 62-year-old couple living in Omaha with no major health problems with an annual income of $40,000 a year might have to pay around $275 a month in premiums through the Healthcare Marketplace, with an annual deductible and out-of-pocket maximum of approximately $10,000. (7)Healthcare alone could severely tax your retirement savings in those three years before qualifying for Medicare. It might be worth going back to work to avoid these costs.
4. You Aren’t Maximizing Your Social Security Benefits
Social Security benefits can be claimed anytime between ages 62 and 70. However, the timing of when you decide to collect these benefits will impact the amount of payout you receive. If you choose an early retirement, you can begin receiving Social Security benefits as soon as age 62. However, if you file to obtain benefits any time before reaching your full retirement age, you will get a reduced amount.
Here’s a look at the monthly maximum benefits you could be eligible for based on when you retire:
- If you retire at 62, your maximum benefit is $2,153.
- If you retire at your full retirement age, which depends on when you were born, your maximum benefit would be $2,687.
- If you wait until 70 to claim your benefits, you could receive $3,538 a month. (8)
Retiring early can impact your monthly income for the rest of your life. If you’ve already claimed Social Security, you only have 12 months to change your mind and you must repay all the benefits you received.
5. You’ve Ignored Your Financial Advisor
Your financial advisor is your partner in your financial journey, but you may have ignored their advice in your quest to enjoy the perks of retirement. Your advisor can help you crunch the numbers to see where your current funds are relative to your goals and show you how different scenarios could affect your retirement outlook. For example, if you are over 50, you are allowed an extra $6,000 in catch-up contributions to your 401(k) or 403(b) and an additional $1,000 to your IRAs. Over time, those amounts could make a significant difference in your savings and make it worth it to return to work. Remember, it’s not forever; it’s just pressing pause on your retirement to set you up for a stronger financial future.
If you’ve already made the move to retire but are rethinking that decision, let us help you make the right decisions from here on out. Call us at (410) 863-1040.
Securities offered through TCM Securities, Inc., Member FINRA/SIPC.
Prostatis Group LLC is a registered investment adviser.
