Retiring at 60 is a tempting prospect, but it’s important to carefully consider the pros and cons before making a decision. While it’s certainly possible to retire early with proper planning, there are a few challenges that you’ll need to overcome.
Challenges of Retiring at 60:
- Limited access to Social Security benefits: You won’t be eligible for full Social Security benefits until age 67. If you retire at 60, you’ll receive reduced benefits, which could significantly impact your income.
- No Medicare coverage: Medicare typically doesn’t kick in until age 65. This means you’ll need to find alternative health insurance coverage, which can be expensive.
- Early withdrawal penalties: If you haven’t reached age 59 1/2, you’ll face a 10% penalty on early withdrawals from retirement accounts like IRAs and 401(k)s.
- Longer retirement period: Retiring at 60 means you’ll need your retirement savings to last for a longer period, which increases the risk of outliving your money.
Benefits of Retiring at 60:
- More time to enjoy retirement: Retiring early gives you more time to pursue your passions, travel, and spend time with loved ones.
- Improved health and well-being: Early retirement can lead to a more relaxed and stress-free lifestyle, which can have positive effects on your physical and mental health.
- Potential for part-time work: You may be able to supplement your retirement income with part-time work or freelance gigs.
- Lower healthcare costs: If you’re in good health, you may be able to save money on healthcare costs by retiring before you develop age-related health conditions.
Tips for Retiring at 60:
- Start saving early and aggressively: The earlier you start saving, the more time your money has to grow. Aim to save at least 15% of your income for retirement.
- Invest wisely: Choose a diversified investment portfolio that matches your risk tolerance and time horizon.
- Consider working part-time: Part-time work can help you supplement your retirement income and stay active.
- Downsize your lifestyle: Reducing your expenses can help you make your retirement savings last longer.
- Seek professional advice: A financial advisor can help you create a personalized retirement plan and make sure you’re on track to reach your goals.
Retiring at 60 is a major decision that requires careful planning and consideration. While there are challenges to overcome, it’s certainly possible to achieve your dream of early retirement with the right approach. By starting early, saving aggressively, and making smart financial decisions, you can set yourself up for a comfortable and fulfilling retirement.
Additional Resources:
- SmartAsset: How to Retire at 60: Step-by-Step Plan
- Citizens Bank: Can I Retire Next Year at 60?
Remember, it’s important to consult with a financial advisor to discuss your individual circumstances and create a personalized retirement plan.
Tapping your nest egg early can be costly
A 10% early withdrawal penalty is typically assessed from the majority of tax-deferred accounts, including standard IRAs and 401(k) plans, if you retire before the age of 59 1/2. “There are ways to access IRA funds before the age of 59 1/2, but it’s complicated and can result in significant fines if done wrong,” says Matt Stephens, the founder of AdvicePoint in Wilmington, North Carolina.
Additionally, the amount you withdraw from traditional accounts funded with pretax contributions will be subject to income taxes unless you have a Roth IRA, which is funded with after-tax contributions. For instance, if you take out $20,000 from an IRA before turning 59 1/2 and you fall into the 15% federal tax bracket, you will have to pay $5,000 in taxes and penalties, which will leave you with $15,000.
You sacrifice the power of compounding interest
When you are saving for retirement, time is on your side; however, when you are spending, it is not. If you save $250 per month, or $3,000 annually, from the age of 25 to the age of 55, you will have roughly $237,000 when you retire, assuming you don’t take any withdrawals and your investments yield an average annual return of 6 percent. Seemingly not a bad return on your $90,000 in contributions.
However, if you work for ten more years and retire at age 65, In that scenario, youll have about $464,000, nearly double. Why? Although the additional decades’ worth of contributions are helpful, they only total $30,000. The true growth is derived from an additional ten years of interest, which is earned on both the principal you contributed and the interest that has compounded over the course of four decades.
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FAQ
How many hours can I work if I retire at 60?
How much should I have in retirement at age 60?
Is 60 the new retirement age?
What happens if I want to retire at 60?
Should you retire early at 60?
Retiring early at age 60 is doable, with adequate planning. It may take some sacrifices in saving more money now or reducing expected post-retirement living standard. However, it’s only a few years before most people retire anyway.
What age should you retire?
But retirement looks different these days, and the age you choose to retire can range widely. Just one in four Americans aged 45 to 54 is aiming to retire at 65, according to the Employee Benefit Research Institute (EBRI). The rest are split between early birds (40% expect to retire before 65) or later exits (36% expect to retire after 65).
Should you plan for early retirement before age 65?
For those with an eye on early retirement before age 65, it helps to break your retirement planning into two phases: before retirement and after retirement. By planning for each phase, you can move toward an early retirement with a greater level of confidence. If 9 to 5 until 65 isn’t your cup of tea, early retirement may be your ticket out.
Is 65 a good age to retire?
For decades, 65 was considered the standard age to transition to retirement. But in recent years, the Social Security Administration has pushed back the full retirement age. In addition, some workers are finding they need more years of earning income before they can quit their jobs.