62 is the most popular retirement age in America. It’s also the riskiest.
Remember the movie “Risky Business“? Student Joel Goodson has an escalating series of financial problems and has to find a way to survive. Preparing for retirement can seem the same way sometime.
62 is risky. That’s not a scare tactic — that, my friends, is maths.
Retiring at 62 means a potential 35-year retirement horizon, a permanent 30% Social Security reduction, three years without Medicare. Add to this tenuous financial position a sequence of returns risk and you’re brewing up a potentially toxic combination.
That’s risky business, indeed. Let’s explore whether retiring at 62 is your equivalent of crashing your dad’s car and trying to pay off an expensive repair bill.
(Editors note: this is a metaphor. Risky Business was a fun movie in 1983 but the editor does not condone Joel Goodson’s business model)
Many people making this decision are doing it with incomplete information.
This is not to say you CAN’T retire at 62 – you can, and many do successfully! Hey, the Financial Independence Retire Early (FIRE) crowd are doing it at 40 or 50 (!). What we’re concerned with here is the actual arithmetic – the numbers that tend to get skipped over — so you can make the decision with your eyes open.
The Social Security Math Nobody Does Correctly
Yes, you will receive a reduced Social security benefit at 62. You know this. Claiming Social Security at 62 permanently reduces your benefit by 30% compared to waiting until your full retirement age of 67. If your full benefit would be $2,500/month, claiming at 62 gives you $1,750/month instead — for life. Again, that’s not news. But there is a bit more behind these numbers.
What you might not be looking at is the fuller picture. The real concern here is that your portfolio has to support you through this decision IF you retire at 62 and ALSO begin your Social Security distribution. There’s a relationship here between the amount you receive in social security and the amount your portfolio has to pay for before you start your distributions..
- If you retire at 62 and claim Social Security immediately, you draw less from your portfolio — but you’ve permanently locked in a lower benefit that will pay out for potentially 30+ years.
- On the other hand, If you retire at 62 and delay Social Security until 67, your portfolio has to cover 100% of your expenses for five full years before any Social Security income arrives. Yikes. That means drawing down your savings harder and faster during the period when sequence of returns risk is at its peak and you’re just coming to grips with the transition from accumulating savings to spending them down.
So Which Approach Is Right for You?
I’m convinced that this is why people draw early – they don’t want to have to transition to spending their cash so quickly. It feels dangerous.
(side note: Social Security is your money. Drawing early means taking a reduction in your money that you’ve given to the government. From that perspective, why would you want to take a discount on your money? In Risky Business terms: why would you start a business with Lana if you could just pay the repair bill yourself?)
The math on which approach wins depends on three things: your portfolio size, your annual spending, and how long you live. There is no universal right answer. But here’s the framework:
- Claiming early (62) makes more sense if your portfolio is large relative to your spending, you have other income sources, or your health suggests a shorter-than-average lifespan
- Delaying (to 67 or 70) makes more sense if your portfolio is modest, your spending is high, or longevity runs in your family
The break-even age for delaying Social Security from 62 to 67 is typically around age 78 to 79 — roughly 11-12 years after you would have started collecting. If you live past that age — which is likely if you’re healthy at 62 — delaying wins. If you don’t, claiming early wins.
The only way to know which approach works for your specific situation is to model it. The DIY Retiree Retirement Probability Calculator lets you run both scenarios and compare the probability of success side by side.
The Healthcare Gap: Real Numbers
Medicare eligibility begins at 65. If you retire at 62, you’re on your own for health insurance for at least three years. While a lot of advice you’ll read sounds like ‘hey, don’t forget about healthcare’, you deserve to see some real numbers here. You don’t want to be buying your own furniture back, as Joel had to, when you retire early.
Your Options for Covering the Gap
ACA Marketplace plan: Depending on your age, location, and plan level, expect to pay $1,000–$1,800/month per person for a Silver plan on the ACA marketplace in 2026, according to ValuePenguin’s analysis of current marketplace rates — with the average for a 62-year-old running $1,691/month.
Income-based subsidies: Your state ACA plan is your best resource here, and the amount of your plan could be offset by a subsidy based on your income level.
- Lower income/drawing from brokerage and/or after tax accounts and you’d have a higher subsidy and pay less.
- Higher income and/or drawing from your pre-tax accounts and you’d have a lower subsidy and pay more.
If your retirement income (portfolio withdrawals + any other income) falls below roughly 4x the federal poverty level, you may qualify for ACA subsidies that significantly reduce premiums. This is a legitimate planning strategy — managing your income level in early retirement to maximize subsidy eligibility. But it requires careful tax and withdrawal planning.
*Key consideration: Drawing social security at 62 means you will have a floor of income and therefore may not qualify for subsidies at the same rate. Worth doing some math on this one to see if this, alone, is a reason to delay social security.
Spouse’s employer plan: If your spouse is still working, joining their employer plan is often the most affordable option. This is one of the strongest arguments for a phased retirement where one spouse retires at 62 and the other continues working for a few years.
The bottom line: budget $10,000–$20,000 per year for healthcare costs between 62 and 65, depending on your situation. That’s $30,000–$60,000 that needs to come from somewhere before Medicare arrives. It’s a number that materially changes many people’s retirement calculations.
Why Sequence of Returns Risk Hits Hardest at 62
Sequence of returns risk — the danger that a market downturn early in retirement permanently damages your portfolio — is real at any retirement age. But it’s uniquely dangerous at 62. Sequence of Returns risk is the potential crack in Joel’s mom’s faberge egg.
Here’s why.
A 62-year-old retiree faces several compounding risks simultaneously:
- A 35-year retirement horizon — longer than almost any other retirement age, meaning more years for a bad sequence to play out
- No Social Security income yet (if delaying) — meaning 100% of expenses come from the portfolio in the years when the market is most likely to cause damage
- No Medicare — meaning healthcare costs add to portfolio withdrawals during the highest-risk window
- Maximum contribution years are over — there’s no “make it up” option if the portfolio takes a serious hit
Consider two retirees who both have $1 million and retire at 62 with identical spending plans. Retiree A retires into a strong market. Retiree B retires into a 25% market decline in year one. Twenty years later, Retiree B may have hundreds of thousands less — not because of anything they did differently, but purely because of timing. I wrote about this in more detail in this article on Sequence of Returns Risk.
This isn’t theoretical. The cohort that retired in 2000 faced exactly this scenario. Many of them are still managing the consequences 25 years later.
The practical implication: If you’re planning to retire at 62, build a cash or short-term bond buffer of 1-2 years of living expenses. This gives your portfolio time to recover from early downturns without forcing you to sell equities at the worst possible moment.
What Working One More Year Actually Buys You
Yes, I know that working one more year is the kind of ‘kicking the can down the road’ advice that sounds hollow. In Risky Business, Joel is determined to go to Princeton (or to Chicago). But the dramatic tension melts away if Joel considers a ‘gap year’ and re-applying to Princeton. What if working to 63 is your gap year?
For the sake of argument, let’s quantify the numbers represented by retiring at 63 versus 62. What does that do to your retirement picture? Here are your gains
- You’ll have one fewer year of portfolio withdrawals – literally saving the amount you would have withdrawn in year 62.
- You’ll have one more year of contributions to your 401k/savings/Roth that you ADD to your portfolio
- Your social security (if taken) will grow by an estimated 7%.
- You’ll experience one less year of having to pay for ACA costs.
- Ultimately, you will have a shorter retirement horizon — one year less of portfolio drawdown on the back end.
And let’s pause on that last one for a moment. What we haven’t talked about is your personal decision. Retiring as early as 62 represents time and freedom, absolutely. I’m not dissuading that or arguing against that personal decision. We’re just looking at the numbers here, but I don’t want to gloss over this intensely personal decision.
From a purely financial perspective, the combined effect of these factors on retirement probability can be significant. In Monte Carlo simulations, going from a 62 to 63 retirement date frequently improves success probability by 3-8 percentage points, depending on portfolio size and spending level. That sucks if you’re hoping for an early out, but it is meaningful. Try playing with this tool to see how it all adds up with just one more year
The Numbers Don’t Lie
Even more revealing: you can try more scenarios with deeper numbers in the DIY Retiree Retirement Probability Calculator with a 62 retirement date, then change it to 63 and compare the results. The delta tells you exactly how much that one year is worth in your specific situation.
The Couples Version
It’s a weird phenomenon that a lot of articles – and even some retirement calculators – gloss over the fact that most people entering their retirement years are a couple. For those of us who are married, we know that can be the riskiest business of all. Talk about a trapeze act without a net!
Three Things Couples Need to Plan Differently
Staggered retirement: If one spouse retires at 62 and the other continues working for 2-3 more years, the household benefits from continued income, employer healthcare coverage, and ongoing retirement contributions — while one partner begins winding down. This is one of the most effective strategies for managing early retirement risk and is dramatically underused. Two important things happen here: You get used to relying on a drawdown of your funds. One of you gets used to having more time. You may also “coast” into it a bit because your portfolio’s gains might be greater than your contribution, meaning that you need to contribute less money to your portfolio and can enjoy a broader lifestyle as you take home more money. It can be a real sweet spot, and if one of you is still working it can soften that landing considerably.
Social Security coordination: For couples, the optimal Social Security claiming strategy is almost never for both spouses to claim at the same age. Retirement planners often suggest that the higher earner should delay as long as possible (ideally to 70) to maximize the survivor benefit, while the lower earner claims earlier. The lifetime value difference between optimal and suboptimal claiming for a couple can easily exceed $100,000.
Survivor income planning: if one of you dies first – an unfortunate likelihood – the survivor is left with one social security benefit. Any honest “can I retire at 62?” analysis for a couple needs to model this scenario explicitly.
So — Can You Retire at 62?
Probably, if:
- Your portfolio is at least 25x your annual spending (not including expected Social Security income)
- You have a healthcare plan for the 3 years before Medicare
- You’ve modeled sequence of returns risk and have a cash buffer
- You’ve run the Social Security timing scenarios and made a deliberate choice
- You’ve stress-tested the plan against a bad first 3 years
Maybe not yet, if:
- Your portfolio is closer to 20x spending or less (low margin for error)
- Healthcare before Medicare hasn’t been budgeted for
- You haven’t modeled what happens if the market drops 30% in year one
- You’re planning to claim Social Security at 62 by default rather than by analysis
The honest answer is that “can I retire at 62?” is the wrong question. The right question is: “What is the probability that my retirement plan survives a 35-year horizon, given my specific numbers?”
That’s a question with a calculable answer.
Hopefully, putting some numbers around this exercise is empowering as you think about the timing of your retirement.
Now go get some old records off the shelf, put on some socks and a collared shirt, and do some lip syncing in your living room. You’ve earned it.
Run your retirement probability now — free, no signup required
Sources include:
average cost data: https://www.valuepenguin.com/how-age-affects-health-insurance-costs
ACA subsidies: Check your zip code: https://www.kff.org/interactive/subsidy-calculator/
Boldin resource: https://www.boldin.com/retirement/retiring-at-62-early-retirement-health-costs/
Corroborating data from SmartAsset: https://smartasset.com/insurance/health-insurance-age-62-to-65-average-cost
Tony Markey, MBA, founded DIY Retiree to provide free retirement planning tools and straight-talk guidance for pre-retirees managing their own financial futures.