What do you get if you retire at 60? Understanding the Pros and Cons

According to the Social Security Administration, full retirement age is 67 for those born in 1960 or later, making retiring at 60 a form of early retirement. For those wondering what do you get if you retire at 60?, the answer is a blend of financial independence and potential hurdles that require careful planning and strategic financial management.

Quick Summary

Retiring at 60 requires a strong personal financial plan to cover a potential income and healthcare gap until Social Security is available at age 62 and Medicare at 65. Benefits include freedom and leisure, but drawbacks include reduced lifetime benefits and higher expenses for a longer period.

Key Points

• No Social Security at 60: You must wait until at least age 62 to claim Social Security, which will result in permanently reduced benefits. Waiting longer increases your payout.

• Healthcare is a Major Cost: You are not eligible for Medicare until age 65, requiring you to fund private health insurance for up to five years, which can be a significant expense.

• Savings Must Last Longer: Retiring at 60 means your retirement funds need to stretch for a longer period, potentially 30 years or more. A longer retirement increases the risk of outliving your savings.

• Early Withdrawal Penalties Avoided: At 60, you can withdraw from 401(k)s and IRAs without the early withdrawal penalty that applies before age 59½, providing a crucial income source.

• Consider Part-Time Work: Working part-time after retiring can help supplement your income, reduce reliance on savings, delay Social Security, and provide social and emotional benefits.

• Strategic Planning is Essential: Successfully retiring at 60 depends heavily on careful financial planning, including creating a sustainable withdrawal strategy and budgeting for inflation.

Your Financial Landscape at 60

Retiring at 60 offers freedom but demands careful financial management [1.2]. Without a regular paycheck, and with Social Security and Medicare years away, a robust strategy is needed to cover living expenses and healthcare [1.2].

Accessing Your Retirement Funds Before 62

A key advantage of retiring at 60 is avoiding the 10% early withdrawal penalty on retirement accounts like 401(k)s and traditional IRAs, which typically applies before age 59½. While you still pay income tax on pre-tax contributions, this access provides a vital income source for early retirees.

Navigating the Social Security Timeline

Social Security benefits cannot be claimed until age 62, and doing so before your full retirement age (FRA) results in permanently reduced monthly payments. For those with an FRA of 67, claiming at 62 means a 30% reduction. Retiring at 60 necessitates a plan to cover at least two years before claiming benefits. Delaying benefits until your FRA or age 70 maximizes your monthly payment.

Bridging the Healthcare Gap Until Medicare

Healthcare is a major concern for those retiring before 65, as Medicare generally starts at that age, leaving a potential five-year gap. Private insurance can be costly, making this a significant financial challenge. Options for coverage include COBRA (temporary continuation of employer plan), the Health Insurance Marketplace (ACA) which may offer subsidies, joining a spouse's plan, or exploring private insurance. Planning and budgeting for this expense is crucial.

The Realities of an Extended Retirement

A longer retirement, potentially 30 years or more, means your savings and spending plan must be sustainable and account for inflation. Here's a comparison of key factors:

Feature	Early Retirement (at 60)	Full Retirement (at 67)
Social Security	Lower monthly benefits (if claimed early) or delayed access.	Full monthly benefits.
Healthcare	Need to fund private insurance for up to 5 years until Medicare.	Immediate access to Medicare.
Savings Longevity	Funds must last longer, increasing the risk of running out of money.	Funds are stretched over a shorter period, lowering longevity risk.
Retirement Lifestyle	More years to enjoy freedom, hobbies, and travel.	Fewer years of retirement.
Financial Flexibility	Less flexibility due to dependence on a smaller nest egg for a longer time.	More flexibility, especially for those who maximized savings.

Should you consider working part-time?

Working part-time after retiring at 60 can offer financial and emotional benefits. It can supplement income, reduce reliance on investments, help cover healthcare costs, and provide a sense of purpose and social connection.

Creating a Sustainable Income Strategy

A strategic withdrawal plan is vital for a longer retirement. While the 4% rule is a guideline, its suitability for early retirees with potentially 30+ years of retirement is debated. Consider delaying Social Security until age 70 for higher monthly payments, adjusting investment strategy to manage risk, and evaluating other income sources like pensions or rental properties.

For additional resources on retirement planning, visit the U.S. Department of Labor website for publications Department of Labor retirement resources.

Conclusion: Making the Right Decision for You

Retiring at 60 offers the gift of time and freedom but requires meticulous financial preparation for income and healthcare challenges. A secure early retirement is possible by assessing savings, understanding benefit options, and considering income alternatives like part-time work [1.2]. Proactive and realistic planning is key.

Frequently Asked Questions

Can I get Social Security benefits if I retire at 60?

No, you cannot. You are only eligible to begin claiming Social Security retirement benefits as early as age 62. Starting benefits before your full retirement age will also result in a permanently reduced monthly payment.

How do I get health insurance if I retire at 60?

Since Medicare does not start until age 65, you will need to find alternative health insurance. Options include COBRA (temporarily continuing your employer's plan), purchasing a plan through the Affordable Care Act (ACA) marketplace, or joining a spouse's health plan.

How much money do I need to retire at 60?

The amount varies based on your lifestyle, location, and expenses. Financial experts often suggest having 8-10 times your annual income saved by age 60, with your savings needing to cover your expenses until you can access Social Security and Medicare.

Are there any penalties for withdrawing from retirement accounts at age 60?

If you are withdrawing from a 401(k) or traditional IRA, you can do so at age 60 without the 10% early withdrawal penalty. However, these withdrawals are still considered taxable income.

Will my pension be affected if I retire at 60?

Yes, your pension may be affected. Many defined-benefit pension plans have a reduced benefit amount for early retirement. The specific reduction depends on your plan, so you should check with your former employer or plan administrator for details.

How does early retirement affect my Social Security payments?

Claiming Social Security early (between ages 62 and your full retirement age) results in a permanent reduction in your monthly benefit. For those born in 1960 or later, claiming at 62 results in a 30% reduction compared to your full benefit at age 67.

Can I work part-time and still receive benefits if I retire at 60?

If you begin claiming Social Security benefits early (before your full retirement age), your benefits will be reduced if you earn more than the annual earnings limit. However, once you reach your full retirement age, you can earn as much as you want without affecting your Social Security payments.