If you are physically able and have a job, no one should retire at age 62. But why is retiring at 62 such a bad idea?
There are plenty of other reasons, especially health reason, why you should not stop working at this age but we focus on retirement funding here:
1. Stopping working at 62 means less time to save. When you consider our longer life expectancies and healthcare costs in the later part of our lives, we’d better save as much and as long as we can.
2. 39% of women and 35% of men in the US retire at 62. That means more than 1/3 of people will be receiving the least the Social Security Administration can pay yo, and their saving has effectively stopped. That means that living at the minimum payout can go on for decades.
3. Women, who have an 80% greater chance to live longer than men and are 80% more likely to live in poverty in retirement, should take a long pause before jumping on the benefits and off the work train as early as possible.
4. Between ages 62 and 66 (full retirement for most of us), benefits increase by 7% a year. An amount USD 1,000 monthly becomes USD 1,300. That’s a 30% increase in a very short time.
5. But if you can work and save to age 70, that check amount grows to USD 1,700. And if you can max out your 401(k) contribution for 8 more years, you just added, before any growth, another USD 196,000!!! Most can’t fund the maximum, but any amount will make the last few decades better than just scraping along at the end of life with the minimum Social Security check.
6. Regular Social Security payment is the only funding that cannot be affected by the stock market, the economy or a black swan event. It is the ultimate safety net and the only retirement source that will never run out. The 7% and 8% annual growth of benefits between ages 62 and 70 is a guaranteed return.
60 is the new 40. There’s a lot of life left to live. Doing it at USD 1,300 a month will be no picnic.
Therefore: Don’t stop working at 62! Stay in work as long as you can!