As a strategic partner who helps clients navigate and grow in changing circumstances, Tina is responsible for the direct management of the Citizens Wealth Management financial planning and estate planning team, including a team of CERTIFIED FINANCIAL PLANNERS™, estate and tax planners, and trust officers.
Most people look forward to their retirement, dreaming of a lifestyle in which they have the freedom to spend their days as they wish and answer to no one. But how much do you need to retire? Deciding when to do it requires a careful evaluation of your current salary, investments, expected retirement lifestyle and other factors.
Dreaming about saying goodbye to your 9-5 job before hitting the traditional retirement age? You’re not alone! Many Americans hope to retire at 62 – the earliest age you can claim Social Security benefits. But here’s the million-dollar question (sometimes literally): how much money do you actually need to retire comfortably at 62?
As someone who’s spent countless hours researching retirement planning, I can tell you that the answer isn’t one-size-fits-all Your retirement needs depend on many personal factors – from where you live to how you plan to spend your golden years.
Let’s talk about everything you need to know about retiring at age 62, such as how much you should save, how much it will cost in each state, and how to make your early retirement dreams come true.
Should You Retire at 62? Key Considerations
First, let’s talk about the big question: is it even a good idea to retire at age 62? That depends on your situation.
Pros of Retiring at 62:
- More years to enjoy retirement while you’re still young and active
- Freedom to pursue hobbies, travel, and spend time with family
- Escape from workplace stress or physically demanding jobs
Cons of Retiring at 62:
- Reduced Social Security benefits (up to 30% less than waiting until full retirement age)
- Need to fund 3 years of healthcare costs before Medicare eligibility at 65
- Your savings must last longer (potentially 30+ years)
The biggest financial challenge? If you retire at 62, you’ll need to stretch your savings over a longer period while dealing with reduced benefits and higher healthcare costs.
The State-by-State Retirement Cost Breakdown
One of the most important factors in how much you’ll need to retire is WHERE you plan to live. According to a recent GOBankingRates analysis, the annual cost to retire comfortably varies dramatically across the United States.
Most Expensive States for Retirement
- Hawaii: $121,228 per year (YIKES!)
- District of Columbia: $99,980 per year
- Massachusetts: $97,699 per year
- California: $90,399 per year
- New York: $88,444 per year
Most Affordable States for Retirement
- Mississippi: $55,074 per year
- Oklahoma: $56,508 per year
- Kansas: $56,899 per year
- Alabama: $56,769 per year
- Iowa: $57,485 per year
That’s a difference of over $66,000 per year between the most and least expensive states! This huge variation shows why location is such a critical factor in retirement planning.
How Much Does the Average 62-Year-Old Have Saved?
If you’re wondering how your savings stack up against others your age, here’s some perspective. Experts typically recommend having about 8-10 times your annual income saved by age 62. So if you make $75,000 annually, you should ideally have $600,000-$750,000 stashed away.
However, reality often falls short of these targets. Recent data shows Americans aged 60-64 have an average retirement savings of only $200,000-$300,000. This significant gap highlights why careful planning is so important – many people are approaching retirement with far less than recommended.
Calculating Your Retirement Number: A Step-by-Step Approach
How do you figure out YOUR number for retirement? Let’s break it down into steps that you can easily follow:
1. Estimate Your Retirement Expenses
Start with your current budget and adjust for how your expenses might change in retirement:
- Housing: Will your mortgage be paid off? Planning to downsize?
- Healthcare: Budget for insurance premiums until Medicare at 65, plus out-of-pocket costs
- Transportation: Probably less commuting, but don’t forget vehicle maintenance and replacement
- Lifestyle: Travel plans? Hobbies? Helping family members?
- Taxes: Remember that withdrawals from traditional retirement accounts are taxable
Don’t forget inflation! Healthcare costs especially tend to rise faster than general inflation.
2. Add Up Your Income Sources
Next, inventory all potential sources of retirement income:
- Social Security: Check your estimated benefits at ssa.gov. Remember, claiming at 62 means a permanent reduction of up to 30% compared to waiting until full retirement age.
- Pensions: If you’re lucky enough to have one, confirm your expected monthly benefit.
- Retirement accounts: 401(k)s, IRAs, etc. – how much can you withdraw sustainably?
- Other savings and investments: Non-retirement accounts, taxable brokerage accounts
- Part-time work: Many “retirees” continue working part-time, which can significantly extend your savings
- Annuities: Consider whether an annuity might provide guaranteed income
- Home equity: Could downsizing or a reverse mortgage provide additional funds?
3. Calculate the Gap and Your Savings Target
The difference between your expected annual expenses and guaranteed income (like Social Security) is the gap your savings need to fill.
A good rule of thumb is the 4% rule: you can take out about 4% of your retirement savings every year and still have a good chance of not running out of money over a 10-year retirement. You can figure out how much you need to save by dividing your annual income gap by 4%.
For example:
- Annual expenses in retirement: $70,000
- Annual Social Security at 62: $20,000
- Annual gap to fill: $50,000
- Savings needed: $50,000 ÷ 0.04 = $1,250,000
This simplified calculation gives you a ballpark savings target. Of course, many factors can affect this number, including investment returns, inflation, and how long you live.
Real-World Examples: Retirement Savings Targets by Income Level
Let’s look at some concrete examples for different income levels. These estimates assume you want to maintain roughly 80% of your pre-retirement income and will receive some Social Security benefits.
| Current Annual Income | Recommended Savings at 62 | Monthly Social Security at 62 | Annual Withdrawal Needed |
|---|---|---|---|
| $50,000 | $550,000 – $650,000 | ~$1,100 | ~$32,000 |
| $75,000 | $850,000 – $950,000 | ~$1,500 | ~$49,000 |
| $100,000 | $1.1 – $1.3 million | ~$1,800 | ~$66,000 |
| $150,000 | $1.8 – $2.1 million | ~$2,200 | ~$98,000 |
Remember, these are just estimates! Your actual needs might be higher or lower depending on your lifestyle, health, location, and other personal factors.
5 Smart Strategies to Boost Your Retirement Readiness
If your current savings don’t quite match your retirement goals, don’t panic! Here are some practical strategies to help bridge the gap:
1. Maximize Catch-Up Contributions
Once you hit 50, you can make extra “catch-up” contributions to your retirement accounts. For 2023, that’s an additional $7,500 for 401(k)s and $1,000 for IRAs. This is one of the best ways to turbocharge your savings in the home stretch.
2. Consider Working a Few More Years
Even working 2-3 years longer can dramatically improve your financial outlook by:
- Allowing more time for savings
- Increasing your Social Security benefits
- Reducing the number of years your savings need to last
- Potentially keeping employer health insurance until Medicare eligibility
3. Explore Part-Time Work in Retirement
Many retirees find that part-time work not only provides extra income but also social connection and purpose. Even earning $10,000-$15,000 annually can significantly extend your savings.
4. Optimize Your Social Security Strategy
If you have sufficient savings, consider using them initially and delaying Social Security until later. Each year you delay after 62 increases your benefit by about 8%.
5. Relocate to a Lower-Cost Area
As we saw in the state comparison, where you live can have a huge impact on your retirement costs. Moving from a high-cost state like California to a lower-cost state like Tennessee could reduce your needed savings by hundreds of thousands of dollars.
Don’t Forget These Often-Overlooked Retirement Expenses
When planning for retirement, many people underestimate certain expenses that can really add up:
- Healthcare costs: Even with Medicare, you’ll have premiums, deductibles, copays, and potentially long-term care expenses.
- Home maintenance: Aging homes require more upkeep, and you may eventually need modifications for accessibility.
- Inflation: What costs $50,000 today will cost about $90,000 in 20 years with 3% annual inflation.
- Taxes: Withdrawals from traditional retirement accounts are taxed as ordinary income.
- Supporting family members: Many retirees end up helping adult children or grandchildren financially.
The Bottom Line: Is Retiring at 62 Realistic for You?
So, can you really retire at 62? The honest answer is: it depends on your financial situation, health, and retirement goals.
For many Americans, retiring at 62 is absolutely achievable with proper planning. Others might need to work a few more years or adjust their lifestyle expectations.
The most important thing is to have a realistic plan based on your personal circumstances. Don’t just assume everything will work out – run the numbers, consider different scenarios, and perhaps consult with a financial advisor who specializes in retirement planning.
I believe that with careful planning and smart financial choices, you can create a retirement that’s both financially secure and personally fulfilling – whether that starts at 62 or a bit later.
Final Thoughts
Figuring out “how much money do I need to retire at 62” isn’t just about reaching a magic number. It’s about creating a comprehensive plan that balances your financial resources with the lifestyle you want.
Remember that retirement planning isn’t a one-time event but an ongoing process. Review your plan regularly, adjust as needed, and stay flexible. By taking a thoughtful, proactive approach, you can work toward the retirement you’ve always dreamed of, at whatever age makes sense for you.
Common ways to gauge retirement saving
There isn’t a single plan that will work for everyone when they retire because everyone has different wants, needs, and goals. Thank goodness, money experts have come up with some tips that, while not perfect, are at least more useful than just “save as much as you can.” ” These can help you answer the question, “How much do you need to retire?”.
- The last number is 10 to 12 times your annual income when you retire. You should have between $1 and $2 million saved if you want to retire at age 67 and make $150,000 a year. 5 and $1. 8 million set aside for retirement. A multiple of your last year’s income is a good starting point because it’s easy to figure out. This is especially true as you get closer to retirement and can easily guess your last year’s income.
- How fast you’re going—a multiple of your current yearly income Some financial experts say that by age 30, you should have saved up the same amount of money as your current yearly income. You should have saved three times your current income for retirement by the time you are 40. Before you retire, it should be 10 to 12 times your annual income. That way, you can be pretty sure you’ll have enough money.
- Seamless transition — roughly 80% of your pre-retirement income. According to the Safe Withdrawal Rate (SWR), this amount comes from taking out about 4% of your retirement accounts every year. The SWR is the most you can take out of your retirement accounts each year to make sure you have enough money to live on for about 25 years.
- Join the club — $1 million to $1. 5 million. Even though $1 million doesn’t buy as much as it used to, if you have more than $1 million, you are still in the top 1% of Americans. When combined with Social Security, it can help you save enough money to cover your retirement needs.
Any of these ideas can help you plan for the future, but they make the math too easy because there are so many things, like your personal retirement goals, that can change your estimate.
Factors that affect how much you’ll need to retire
You will need to evaluate multiple different factors when estimating your income needs in retirement. Here are some things to consider that will help you answer the question, “How much do you need to retire?”
Retire at 60? Shocking Average Savings vs. The REAL Number You Need (Spoiler: It’s Different!)
FAQ
What is a good net worth at 62 years old?
Figures show the average net worth by age group. Average Net Worth: 45–54$971,300$246,70055–64$1,564,100$364,30065–74$1,780,700$410,00075 or older$1,620,100$334,700
Can I retire at 62 with $400,000 in 401k?
Can You Retire at 62 With $400,000 in a 401(k)? It’s certainly possible to retire early on $400,000, but it won’t be easy. There is a good chance that working and saving for a few more years will make your retirement a lot more comfortable.
How much money should I have when I retire at 62?
Is $600,000 enough to retire at 62?
You might be able to retire at age 62 with $600,000, but it depends on your health, lifestyle, and ability to get extra money from Social Security or pensions. You’ll need to carefully consider factors such as your annual spending, how long you’ll need the money, your health and potential long-term care costs, and your Social Security claiming strategy.
How much money do you need to retire at 62?
The amount needed to retire at 62 depends on personal expenses, anticipated income sources and life expectancy. A common rule of thumb for retirement planning is Fidelity’s 10x Rule, which dictates that you should have 10x your annual salary saved by age 67 – the full retirement age (FRA) for people born in 1960 and later.
How much money do you need After retirement?
Based on the 80% principle, you can expect to need about $96,000 in annual income after you retire, which is $8,000 per month. The good news is that, if you’re like most people, you’ll get some help from sources other than your savings, such as your Social Security benefits. For most people, Social Security is a significant income source.
How much should you save for retirement?
Some experts claim that savings of 15 to 25 times of a person’s current annual income are enough to last them throughout their retirement. Of course, there are other ways to determine how much to save for retirement. The calculations here can be helpful, as can many other retirement calculators out there.
How much income do you need in retirement?
The income every couple needs in retirement depends on a multitude of factors. These factors include where the couple lives as well as the lifestyle they wish to maintain. It’s often recommended that an individual have the ability to live on 55% to 80% of their working income after entering retirement.
How much money can you take out during your first year of retirement?
The 4% rule says that in your first year of retirement, you can withdraw 4% of your retirement savings. So, if you have $1 million saved, you would take $40,000 out during your first year of retirement either in a lump sum or as a series of payments.
How much should you budget for retirement?
A common rule is to budget for at least 70% of your pre-retirement income during retirement. This assumes some of your expenses will disappear in retirement, and 70% will be enough to cover essentials. Remember, that’s a general guideline, and your needs may vary. Here’s more on how much to save for retirement.