Retiring at 62 and Filing for Social Security

Retiring at age 62 and filing for Social Security will reduce a person’s lifetime benefits by up to 30% compared to waiting until their full retirement age. However, a person with $2.5 million in a Roth IRA may feel more comfortable retiring at age 62, despite the impact that early retirement will have on their Social Security.

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So, can a person with $2.5 million in a Roth IRA who expects to collect around $2,500 in monthly Social Security checks afford to retire at age 62? The likely answer is yes, but there are some critical things to keep in mind if you’re in a similar financial situation.

Don’t Overestimate Your Benefits

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First and foremost, be sure about how much your Social Security benefits will be. Mike Dever, founder and CEO of Brandywine Asset Management, says a person who expects to collect $3,000 at age 62 has miscalculated their Social Security income.

While the full retirement age for someone retiring today is 67, the most a person can collect at age 62 is $2,572, Dever noted.

The $428 difference between $3,000 in monthly benefits and $2,572 isn’t in and of itself essential. Most of this retiree’s income will come from the $2.5 million Roth IRA. But the bigger issue is absolutely critical: Beware of miscalculations.

A person who expects to receive $3,000 in monthly benefits at 62 would end up with $5,000 less in annual income. Double-check all of your assumptions before you leave the workforce, because you don’t want to discover a mistake like this one after the fact. A financial advisor can help you estimate and plan for your Social Security benefits.

Prepare for Inflation and Volatility

A Roth IRA balance of $2.5 million can allow a retiree to plan for relatively generous withdrawals.