What's Your Magic Number? Planning to Retire at 62

Early retirement sounds amazing until you start doing the math. If you’re wondering how much money you need to retire at age 62, you’re asking the right question. The answer isn’t one-size-fits-all, but there are proven frameworks to figure it out for your specific situation.

The Math Behind Early Retirement at 62

Let’s start with the numbers that matter. According to Fidelity’s guidance, if you want to retire five years early at 62 (instead of full retirement age at 67), you should aim to have about 14 times your annual salary saved. So if you earn $115,000 per year, you’re looking at roughly $1.61 million set aside.

Sounds like a lot? There’s another way to think about it using the 4% rule. This rule suggests you can withdraw 4% of your total savings in your first retirement year and adjust for inflation annually—meaning your money should last 30+ years. If you have $1 million saved, you’d withdraw $40,000 in year one, then $41,200 in year two (assuming 3% inflation).

The real question though: how much do you actually spend each year? Your personal expenses—housing, healthcare, travel, taxes—drive the entire calculation.

Don’t Forget About Social Security

Here’s where retiring at 62 gets tricky. You can claim Social Security at 62, but it comes with a permanent penalty. If your full retirement age is 67 and you’d get $2,000 monthly at that age, claiming at 62 could reduce it by 30%, leaving you with just $1,400 per month. That’s a big difference over 25-30 years of retirement.

The flip side? Waiting until age 67 for full benefits or pushing to 70 (which boosts payments by 8% annually) can dramatically improve your long-term security. If you have other income sources—rental properties, dividends, part-time work—delaying Social Security becomes more attractive.

The Healthcare Curveball: Ages 62 to 65

This catches many early retirees off guard. You can’t access Medicare until 65, but retiring at 62 means covering healthcare costs for three years on your own. That’s expensive.

Your options include buying through the Affordable Care Act marketplace (though premiums can sting), using a Health Savings Account (HSA) if eligible, or finding part-time work that includes health benefits. For context, Fidelity estimates a 65-year-old retiring in 2024 should budget roughly $165,000 for healthcare over their remaining lifetime.

Building Your Retirement Budget

Once you know how much money you need to retire at age 62, break it down into categories:

Fixed expenses: Mortgage, property taxes, insurance, utilities Variable expenses: Food, transportation, entertainment, travel Wildcard expenses: Healthcare, home repairs, unexpected emergencies

Downsizing your home, relocating to a lower cost-of-living area, or eliminating debt before retirement can significantly stretch your savings. Even a 10-20% reduction in expenses changes your required nest egg dramatically.

Smart Withdrawal Strategies

When it’s time to tap your nest egg, the order matters for taxes. A tax-efficient approach often means:

• Drawing from taxable accounts first
• Delaying traditional 401(k) and IRA withdrawals when possible
• Considering Roth IRA conversions (you’ll pay taxes upfront, but future withdrawals are tax-free)
• Keeping investments diversified to handle market downturns without panic

Since Required Minimum Distributions (RMDs) start at age 73, you have some flexibility in how you manage withdrawals between 62 and 73 to minimize your tax bill.

The Inflation and Longevity Factor

Planning for 25-30 years of expenses isn’t just about the number today—it’s about what that money needs to cover in the future. Inflation erodes purchasing power, and healthcare costs typically rise faster than general inflation.

Keep a meaningful portion of your portfolio in stocks for long-term growth rather than moving everything to bonds. Adjust your withdrawal rate based on market conditions some years you might withdraw less if markets underperform. Maintain an emergency fund separate from your main investment portfolio.

Making It Real

So how much money do you need to retire at age 62? Start by calculating your annual expenses, add 25-30% for unexpected costs and inflation, then multiply by the number of years you expect to live. Cross-reference that with the 14x salary rule and the 4% withdrawal method. The number that appears across multiple methods is probably your target.

The path to early retirement is achievable, but it requires honest assessment of your spending, realistic expectations about Social Security timing, and disciplined execution. If you’re serious about it, getting professional advice can help you stress-test your plan against market scenarios, tax implications, and life expectancy projections you might miss on your own.