Four Financial Red Flags Proving You’re Not Ready To Retire at 62
In 1991, the average American reported retiring at 57; in 2024, the average reported retirement age was 61. It was also reported that the target retirement age among those who aren’t retired went up from 60 in 1995 to 65 in 2024.
So, while some people can still retire at 62, know that retirement ages are trending upward. You might think you can retire at 62 since that’s the age at which you’ll be eligible for Social Security; however, you might not be on track if you still face the following types of issues:
You Still Have High-Interest Debt
As you get closer to retirement, debt could weigh down the likelihood of retiring at 62, especially if you have high-interest debt. A mortgage is one thing; perhaps you’re close to paying that off or will downsize in retirement. But if you have high-interest debt with credit cards, interest fees could eat away at your monthly retirement income, indicating that you’re not saving enough money.
According to the Center for Retirement Research at Boston College, about four out of ten Americans aged 65plus have too much debt. Consider paying down your high-interest unsecured debt, such as credit cards, before retirement.
Your Monthly Retirement Income Projections Are Too Low
Another big sign that you’re not on track to retire at 62 is if calculations to project your monthly retirement income find that the numbers are lower than you’d like. And if you still need to do those calculations, do so well before retiring so you know where you stand.
You can find free retirement income calculators online that let you put in information like your retirement savings and the years until retirement to calculate the monthly income your retirement portfolio will yield. If that amount, combined with Social Security projections, isn’t enough to cover your bills and desired spending in retirement, you need to change course. Increasing your retirement age could be one solution, or you might decide to make changes like saving and investing a higher portion of your income.
Plan for Healthcare Expenses
If you retire at 62, you could have a gap of a few years until you are eligible for Medicare at age 65. You might have gotten used to having your health insurance covered mainly by your employer, but the costs of buying it on your own, especially in your 60s, could get expensive. That’s not to say that not having employer-sponsored health insurance means you can’t retire. However, it’s crucial to factor in health insurance costs and potential out-of-pocket expenses.
Once you qualify for Medicare, there can still be other costs to prepare for, including Medicare premiums. For 2024, Medicare Part B premiums range from $174.70 to $594, depending on your income. Planning for long-term care or medical/personal assistance costs is essential. Some retirees choose long-term care insurance, while others choose to self-fund. Either way, you don’t want to retire without accounting for these potential costs.
No Post-Retirement Plan
If you have yet to plan how to spend your life in retirement, you’re probably not ready to retire at age 62. Not having a plan affects your ability to enjoy retirement from a mental and emotional perspective, but also financially.
For example, where you live in retirement can affect your retirement income needs. If you decide at the last minute, you might need more money to support your desired lifestyle.
The Bottom Line
Morgan Stanley research has found that retirees with different retirement lifestyles have different likelihoods of affording essential and discretionary expenses. For example, those who spend time and money traveling in the early and middle years of retirement are less likely to afford necessary and discretionary expenses than retirees who focus on entertaining guests at home.
Not having these four areas — debt, retirement income projections, healthcare, and retirement lifestyle — planned out and under control indicates you’re not on track to retire at age 62. You might still be able to get there, but you probably need to make some adjustments now rather than waiting until retirement.