Although it is five years earlier than the conventional retirement age and even farther from the age at which full retirement benefits can be obtained from Social Security, the age of 60 is getting near to being the age at which most individuals retire. According to a survey by Gallup in 2021, the typical retirement age is 62.
The fact that 62 is the youngest age at which the vast majority of individuals become eligible to receive Social Security payments is one of the primary factors contributing to the age's status as the standard retirement age. People who are considered disabled are often the only individuals who are eligible to receive Social Security income before the age of 62.
People typically do not begin collecting Social Security payments until age 62. For instance, according to the Social Security Administration, the average claiming age for males in 2018 was 64.7 years old, while the average claiming age for women was 64.6 years old. The primary justification is that waiting will result in a higher total amount received each month.
Another reason why retiring at the age of 60 might be difficult is because of access to Medicare. People typically aren't eligible for Medicare until the month that they turn 65, with certain exceptions made for those who are disabled. The national healthcare program provides crucial aid for dealing with the possibly substantial financial load of medical bills in later years. Rising medical prices might cause this burden.
Significantly, retiring at 60 is superior to retiring at an earlier age. Before reaching age 59 and a half, individuals are liable to a penalty of 10% of the amount they withdraw from tax-advantaged retirement funds such as IRAs and 401(k) plans. After then, there is no longer a penalty, but you will still be subject to regular income taxes.
Basics of Retiring at 60
A successful retirement demands striking a balance between income and spending at any age. When you start thinking about early retirement, you should first choose how you want to spend your time and how much money you will need to maintain that pace of life. The last step is determining how much money you can produce after retirement via investments, part-time employment, or other sources.
The next step is to contrast the two numbers. If the income outcome does not meet expectations, it may be required to make adjustments to the lifestyle expectations for after retirement, as well as to modify the investment strategy or job plans to create additional income.
Steps For Retiring at 60
The first thing you should do when planning to retire at age 60 is to calculate how much money you'll need. To estimate the amount of money that will be required after retirement, a good rule of thumb is to take the amount of money that was earned before retirement and multiply it by 70 percent. For illustration's sake, if your pre-retirement income is $100,000 per year, this benchmark indicates that you should be able to maintain your lifestyle on $70,000 per year once you retire.
This is merely a general guideline and may need to be modified for certain circumstances. For instance, people who retire before age 65 won't be eligible for Medicare. They may need to include premiums for private health insurance in their budget. If this is the case, their post-retirement income requirements may become more stringent.
On the other hand, it is possible that retirees would need less than 70% of their income before retirement if they make considerable savings to their spending, such as downsizing their home and relocating to an area with reduced living costs. There is a correlation between retiring with less debt and having a lower cost of living.
The second stage is to put some of the money away in savings. Use a company retirement account like a 401(k), an individual retirement account, or any other approach that works for you; just make sure you alter your asset allocation throughout the years to meet your position. Using a 401(k) is one example of a workplace retirement account.
Lastly, you need a strategy for accessing your money after retirement. When it comes to determining whether or not a person's assets are sufficient for retirement, one line of the study shows that if you take roughly 3% of your entire portfolio out each year to cover your costs of living during retirement, your savings should be enough to support you for at least 30 years. If you follow this approach, you will need a retirement portfolio worth $2.3 million to take $70,000 during your retirement.
