Last updated: April 1, 2026

How to Retire at 62: A Step-by-Step Financial Plan

Retiring at 62 is absolutely achievable, but it comes with three gaps most people underestimate: three years without Medicare, up to five years before full Social Security benefits, and a portfolio that has to last 25-30 years. Get those three gaps wrong and a comfortable retirement unravels fast.

This guide walks through a concrete, step-by-step plan for retiring at 62 with $300,000 to $700,000 saved. Every step includes real numbers you can apply to your own situation today.

Step 1: How Much Money Do You Actually Need to Retire at 62?

Most people in the $300,000-$700,000 savings range need between $50,000 and $75,000 per year to maintain their lifestyle in retirement. That translates to $4,167-$6,250 per month before taxes.

Start with your current monthly spending. Pull your last three months of bank and credit card statements and categorize everything into fixed costs (mortgage or rent, insurance, utilities) and variable costs (dining, travel, subscriptions). Then add two line items most pre-retirees forget: healthcare and long-term care.

Step 2: How Do You Audit Your Assets Before Retiring at 62?

A complete asset audit takes one afternoon and gives you a clear picture of what you have to work with. List every account, its current balance, and whether withdrawals are taxable, tax-deferred, or tax-free.

• Traditional IRA and 401(k): Tax-deferred. Withdrawals taxed as ordinary income. 10% penalty before age 59.5 unless you qualify for an exception.
• Roth IRA: Contributions can be withdrawn anytime penalty-free. Earnings are tax-free after age 59.5 if the account is at least 5 years old.
• Taxable brokerage accounts: No withdrawal restrictions. Gains taxed at capital gains rates, which are often 0% or 15% for retirees.
• Fixed annuities and MYGAs: Tax-deferred growth. Withdrawals taxed as ordinary income. Check surrender periods before accessing funds.
• Cash and savings: Fully liquid. No tax consequence beyond interest earned.

Step 3: How Do You Handle Health Insurance Before Medicare at 62?

This is the most expensive and most overlooked problem in early retirement. Medicare doesn’t start until 65, which means a couple retiring at 62 needs to self-fund three full years of health insurance.

Private health insurance at 62 is not cheap. A healthy couple can expect to pay $1,500-$2,500 per month in premiums depending on the plan, the state, and their income. That is $18,000-$30,000 per year, before any deductibles or out-of-pocket costs.

ACA Marketplace Plans: If your income falls below 400% of the federal poverty level (roughly $80,000 for a couple in 2026), you may qualify for premium tax credits that significantly reduce your monthly cost.

COBRA Coverage: If you leave an employer with group coverage, COBRA coverage lets you continue that plan for up to 18 months. The catch is you pay the full premium, including the portion your employer used to cover. COBRA is often $1,200-$2,000 per month for a couple.

Spouse’s Employer Plan: If your spouse is still working, staying on their employer plan is almost always the lowest-cost option.

Budget at least $1,200 per month for healthcare as a floor. If you have ongoing prescriptions or expect any procedures, budget $1,800-$2,000.

Step 4: Should You Take Social Security at 62 or Wait?

Claiming Social Security at 62 means accepting a permanent reduction of up to 30% compared to waiting until your Full Retirement Age (66 or 67 for most people reading this). Waiting until 70 increases your benefit by 8% per year beyond Full Retirement Age.

The break-even point for delaying is roughly age 78-80. If you expect to live past that age, delaying pays off. Review the Social Security reduction for early claiming to see your exact numbers.

For a deeper look at the tradeoffs, see our guide on taking Social Security at 62, which covers break-even analysis, spousal benefits, and tax implications in detail.

Step 5: How Do You Create Bridge Income Between 62 and Social Security?

The bridge years (ages 62 to 67, roughly) are when most early retirees make their biggest financial mistakes – either drawing down investments too fast or claiming Social Security too early out of fear. A structured bridge income plan eliminates both problems.

The Annuity Bridge Strategy: Purchase a 5-7 year multi-year guaranteed annuity (MYGA) with a portion of your IRA or savings. The guaranteed interest accumulates or pays out systematically, providing predictable monthly income while your investment portfolio and future Social Security benefit continue to grow undisturbed. See our full explanation of the annuity bridge strategy and how to implement it. Check current MYGA rates to see what 5-year and 7-year rates look like right now.

IRS Rule 72(t) Distributions: If you need to access traditional IRA or 401(k) funds before age 59.5 without the 10% early withdrawal penalty, IRS Rule 72(t) substantially equal periodic payments (SEPP) allow you to take penalty-free withdrawals as long as you take them at least annually for five years or until you reach 59.5, whichever is longer. Once started, you cannot change the amount without triggering back-penalties.

Roth Conversion Ladder: If you have a traditional IRA, converting a portion to a Roth IRA each year during low-income bridge years can reduce your future tax burden significantly. Conversions done at 62-64 when your income is low are taxed at lower rates, and those converted funds become accessible tax-free five years later.

For help choosing the right annuity product for a bridge strategy, see our guide to the best annuities for bridging to Social Security.

Step 6: What Is Sequence-of-Returns Risk and Why Does It Matter Most at 62?

Sequence-of-returns risk is the danger that a major market decline in the first 5-7 years of retirement will permanently damage your portfolio, even if markets recover strongly afterward. At 62, you are at peak exposure to this risk.

If you retire with $600,000 and the market drops 30% in year two, your portfolio falls to $420,000 while you are still withdrawing $30,000-$40,000 per year. Now your portfolio has to grow back from $380,000 instead of $600,000. The math becomes brutal even if the market later delivers strong returns.

Three ways to reduce sequence-of-returns risk at 62:

• Bucket strategy: Keep 2-3 years of expenses in cash or short-term CDs. Never sell equities in a down market to fund living expenses.
• Guaranteed income floor: Use a portion of savings to fund guaranteed income (annuity, MYGA interest, future Social Security) that covers essential expenses regardless of what markets do.
• Flexible withdrawal rate: Be willing to reduce discretionary spending by 10-15% in down-market years rather than holding withdrawals constant.

To understand what a guaranteed income floor looks like in practice, see our calculator for how much a $500,000 annuity pays at current rates.

Real Example: Tom and Susan Retire at 62 With $650,000

Tom and Susan are both 62. They have $650,000 in traditional IRAs, a paid-off home worth $380,000, and $40,000 in savings. They need $5,500 per month ($66,000 per year) to live comfortably. Neither has claimed Social Security yet. Tom’s projected benefit at 67 is $2,400/month; Susan’s is $1,600/month ($4,000/month combined).

First, they address healthcare. They estimate $1,600/month for an ACA silver plan. By keeping their taxable income below $75,000 through careful IRA withdrawal management, they qualify for modest premium tax credits and bring the net cost to around $1,300/month.

Second, they use $200,000 of their IRA to purchase a 5-year MYGA at 5.25%. That generates approximately $10,500 per year in interest – $875/month, guaranteed, for five years regardless of market conditions.

Third, they begin 72(t) distributions from a separate $150,000 IRA account. Their calculated annual SEPP withdrawal is approximately $8,400 per year ($700/month).

That gives them $1,575/month in guaranteed income from the annuity and 72(t) combined, before touching their remaining $300,000 investment portfolio. They withdraw another $3,925/month from the portfolio. At 67, both claim Social Security. Their $4,000/month combined benefit covers most of their core expenses and they dial back portfolio withdrawals to under $1,500/month, extending their investment assets by 10+ years.

One More Factor: State Taxes on Retirement Income

Where you live in retirement matters more than most people realize. Some states tax IRA withdrawals and annuity income at full income tax rates. Others exempt pension and annuity income. A handful have no income tax at all. Check our guide to states that don’t tax retirement income before you decide where to spend your retirement years.