What Age Should You Retire: 62 or 65?

Deciding whether to retire at 62 or 65 involves multiple factors. Retiring at 62 lets you enjoy more years of retirement, but reduces the amount of Social Security you’ll receive each month. . Delaying your retirement plans until you’re 65 provides additional time to build savings, but you should also take your health, financial situation, and personal lifestyle goals into consideration.

A financial advisor can help you determine when you should retire and create a plan to reach those long-term goals.

How to Start Thinking About When You Should Retire

Start by envisioning what you want your retirement to look like. Do you plan to travel extensively, pursue hobbies, or perhaps start a new venture? Understanding these goals will help you estimate the financial resources you’ll need, and how your current savings, investments and potential Social Security benefits align with that vision of retirement.

Most guidelines for retirement savings say you should anticipate having to replace about 70-80% of your pre-retirement income. This percentage can vary based on your lifestyle and health care needs, so tailor it to your specific situation. If you have a family history of longevity and are in good health, you might plan for a longer retirement period, which requires more savings. While you can begin collecting Social Security as early as age 62, waiting until your full retirement age (typically between 66 and 67) or even until age 70 can increase your monthly benefits.

Example: Retirement at Age 62 vs. 65

If your full retirement benefit at age 67 is $2,000 per month, retiring at 62 could lower your monthly benefit by about 30%, down to approximately $1,400. You’ll also need savings or other income to cover expenses, including healthcare costs, until Medicare starts at age 65.

Retiring at age 65, on the other hand, can help you balance working longer and claiming benefits early. Using the same example, your monthly Social Security benefit at 65 might be around $1,733, roughly 13% lower than your full benefit at 67, but significantly more than claiming at 62. You’ll also immediately qualify for Medicare, reducing healthcare expenses. Plus, you’ll have three additional years of work to build savings and pension benefits.

Tips for Choosing Between Retirement at 62 or 65

Choosing when to retire can affect your finances and lifestyle. Therefore, deciding between retirement at 62 or 65 will depend on your financial situation, health needs and personal plans. Here are five key points to consider before making your decision.

Evaluate Your Financial Situation

Assess your retirement savings, investments and potential Social Security benefits. Make sure your savings can cover the gap if you retire early. Also, many employer-sponsored pensions don’t start paying until age 65.

Consider Health and Longevity

Your health and life expectancy are important factors in retirement planning. If you have health concerns or a family history of shorter lifespans, retiring earlier might allow you to enjoy more active years. On the other hand, if you anticipate living longer, delaying retirement could help you maximize your benefits.

Understand Social Security Implications

Social Security benefits can increase by about 8% each year, if you delay claiming between your full retirement age and age 70. Therefore, claiming at 65 instead of 62 can result in higher monthly payments, which can significantly impact your long-term financial stability.

Reflect on Personal Goals and Lifestyle

Think about what you want to achieve in retirement. If you have plans that require more time and energy, such as traveling or pursuing hobbies, retiring at 62 might be more appealing. However, if you enjoy your work and wish to continue contributing to your retirement accounts, waiting until 65 could be beneficial.

Evaluate Healthcare Needs

Healthcare costs can be a major expense in retirement. Medicare eligibility begins at 65, so retiring at 62 means you’ll need to secure alternative health insurance for three years. Consider how this affects your overall retirement budget.

Where to Start: Compare Retirement Income Sources

A woman evaluating different factors that could impact her retirement portfolio.

When deciding between retiring at 62 or 65, it helps to estimate how much income you’ll actually have coming in at each age. Your retirement income may come from several sources, including Social Security, personal savings, pensions, and investment accounts. And the timing of your retirement can significantly affect how much you receive from each.

Social Security

Whether you start claiming Social Security at 62 or 65, you’ll receive reduced monthly payments for life, assuming your full retirement age is 67. The difference is in how much your payments will be reduced.

The Social Security Administration generally reduces your benefits by 5/9 of 1% for each month you claim benefits before your normal retirement age, up to 36 months. If you claim more than 36 months early, benefits are further reduced by 5/12 of 1% each month.

This means if you claim at 62, you’ll see a 30% reduction in benefits, while claiming at 65 will result in a smaller reduction of 13.3%.

That difference adds up. Over a 20-year retirement, waiting just three extra years could mean tens of thousands of dollars in additional income.

However, claiming earlier lets you draw on benefits while preserving your savings for longer. If you retire at 62, you’ll need to rely more heavily on your personal savings, investment accounts, or part-time jobs to bridge the gap until Medicare eligibility at 65. If you wait until 65, your Social Security payments will be higher, and you’ll have had three extra years to save, invest, and possibly receive employer contributions.

How Working Longer Affects Pension and 401(k) Growth

Working until 65 doesn’t just increase your Social Security benefits, it can also give your retirement accounts more time to grow. Continuing to contribute to a 401(k) or IRA allows for additional employer matches and compounding returns.

For instance, if you have a $500,000 investment portfolio growing at a modest 5% annual return, working three extra years could increase your balance to nearly $579,000, an extra $79,000 without any additional contributions. If you continue adding, say, $10,000 per year, that balance could exceed $610,000 by age 65.

Delaying retirement also helps pension benefits if your employer plan bases payouts on years of service or final salary. In many cases, an extra few years can substantially raise your guaranteed monthly pension income.

Bottom Line

Choosing whether to retire at 62 or 65 depends on your personal situation and finances. Retiring at 62 provides more time for hobbies, travel, or part-time work. Retiring at 65 offers larger Social Security payments, more time to save, and immediate Medicare eligibility, which helps lower healthcare costs. A financial advisor can help you decide which retirement age matches your goals and finances.

Retirement Planning Tips

A financial advisor can help you determine when is the best time to claim Social Security and manage other factors to maximize your benefits. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.