How to Retire at 62: A Step by Step Plan

Retiring at 62 is realistic for plenty of people, but three gaps catch most of them off guard: three years without Medicare, up to five years before a full Social Security check, and a nest egg that suddenly has to cover 25 to 30 years instead of a shorter, later retirement. Miss any one of those and a plan that looked solid on paper can unravel fast.

This walkthrough assumes $300,000 to $700,000 in savings, which covers a wide swath of people eyeing 62. Household savings surveys put the typical balance for people aged 55 to 64 closer to $120,000, so if your number is well under $200,000, expect real trade-offs: a smaller home, a cheaper state, part-time work, or some combination of the three. The framework below still applies, it just leaves less room for error.

Step 1: figure out what you actually need to spend

Most households in the $300,000 to $700,000 range spend somewhere between $50,000 and $75,000 a year to keep their current lifestyle, or roughly $4,200 to $6,300 a month before taxes.

Pull three months of statements and split each line item into two buckets: the fixed bills (mortgage, insurance, utilities) and the ones that flex month to month (dining out, trips, streaming and the like). Two categories get skipped more than any other: healthcare before Medicare, and the possibility of long-term care later.

Government spending surveys, including the Bureau of Labor Statistics' Consumer Expenditure Survey, show these categories vary widely by region and health status, so treat the ranges above as a starting point to refine with your own statements.

Step 2: take stock of every account you hold

A thorough account review takes about an afternoon and shows exactly what you are working with. List every account, its balance, and how withdrawals from it get taxed.

• Traditional IRA and 401(k): Withdrawals count as ordinary income, and a 10% penalty applies before age 59 and a half unless an exception applies.
• Roth IRA: You can pull out your original contributions anytime with no tax or penalty. Earnings come out tax free once you are past 59 and a half and the account has been open at least five years.
• Taxable brokerage accounts: No withdrawal restrictions apply, and gains are usually taxed at 0% or 15% capital gains rates for most retirees.
• Fixed annuities and MYGAs: Growth is tax deferred, and withdrawals are taxed as ordinary income. Check the surrender schedule before you plan to touch this money.
• Cash savings: Fully accessible, with only ordinary income tax owed on any interest earned.

Once every account is listed, mark which ones you plan to draw from first, second and last. Most retirees do best pulling from taxable brokerage accounts early, letting Roth balances keep compounding as long as possible, and saving traditional IRA withdrawals for years when required minimum distributions force the issue anyway. Getting this order wrong, for example, draining a Roth first out of habit, can quietly cost you thousands in avoidable taxes over a 25 to 30 year retirement.

Step 3: cover health insurance until Medicare starts

This is the piece early retirees underestimate most. Medicare does not begin until 65, so a couple retiring at 62 has to self-fund three full years of coverage.

Private coverage for a healthy couple typically runs $1,500 to $2,500 a month in premiums, or $18,000 to $30,000 a year, before deductibles and other out-of-pocket costs.

ACA marketplace plans: Household income under roughly 400% of the federal poverty level, close to $80,000 for a couple in 2026, can qualify for premium tax credits that meaningfully lower the monthly bill.

COBRA: Leaving an employer plan usually lets you keep that same coverage through COBRA for up to 18 months. You pay the full premium yourself, including the share your employer used to cover, which often runs $1,200 to $2,000 a month for a couple.

A working spouse's plan: If one spouse is still employed, staying on their employer coverage is almost always the cheapest route.

Plan on at least $1,200 a month for healthcare as a floor, and closer to $1,800 to $2,000 if you have ongoing prescriptions or an expected procedure. Whichever route you choose, price it out during open enrollment the year before you retire so the number in your budget reflects a real quote rather than a guess.

Step 4: decide when to start Social Security

Claiming at 62 locks in a permanent cut of up to 30% versus waiting for your full retirement age, which lands at 66 or 67 for most people reading this. Waiting past full retirement age adds roughly 8% a year in delayed credits, up to age 70.

The break-even point for delaying typically falls around age 78 to 80. If you expect to live past that, delaying tends to pay off. Our guide to the Social Security break-even age walks through the math with real numbers, spousal benefits included.

This decision is rarely just about your own life expectancy. A spouse who outlives you steps into whichever benefit is larger, so the higher earner in a couple delaying to 70 often does more to protect the household than either spouse claiming early would. Run your own numbers through the Social Security claiming calculator before you file, since the age you pick cannot easily be undone once benefits start.

Step 5: build bridge income for the years before Social Security

The stretch between 62 and full retirement age is where early retirees make their costliest mistakes, usually either draining investments too aggressively or claiming Social Security early purely out of nerves. A deliberate bridge income plan avoids both.

A MYGA bridge. Put a slice of your IRA or savings into a 5 to 7 year multi-year guaranteed annuity. The locked interest rate delivers predictable income while your market portfolio and future Social Security benefit keep compounding untouched. Our annuity bridge strategy guide walks through how to size and structure this.

72(t) distributions. IRS Rule 72(t) lets you pull from a traditional IRA or 401(k) before 59 and a half without the 10% penalty, as long as the payments run at least annually for five years or until 59 and a half, whichever is longer. Once you start, the amount is locked in, and changing it triggers back penalties.

A Roth conversion ladder. Converting pieces of a traditional IRA to Roth during the lower income years around 62 to 64 can shrink your future tax bill, and converted funds become accessible tax free five years after each conversion.

Our guide to MYGA rates by term is a good next stop for pricing a bridge annuity for your specific numbers.

Step 6: manage sequence of returns risk

Sequence of returns risk is the danger that a market drop in your first five to seven retirement years permanently damages your portfolio, even if the market fully recovers afterward. At 62, that risk sits near its peak.

Retire with $600,000 and see the market fall 30% in year two, and your balance drops to $420,000 while you are still pulling out $30,000 to $40,000 a year. Now that smaller balance has to recover and keep funding withdrawals at the same time, which is a much steeper climb.

Three ways to soften this risk at 62:

• A cash bucket. Keep two to three years of expenses in cash or short-term CDs so you never have to sell stocks at a loss to cover bills.
• A guaranteed income floor. Fund essential expenses with guaranteed sources, an annuity, MYGA interest, or Social Security, so a bad market year does not touch your bills.
• A flexible withdrawal rate. Be ready to trim discretionary spending by 10% to 15% in a down market rather than pulling the same amount regardless of conditions.

None of these three has to work alone. Most early retirees combine a modest cash bucket with a guaranteed floor big enough to cover essentials, then leave the flexible withdrawal rate as a backup plan for years when markets are unusually rough. The goal is not to eliminate risk entirely, which is not really possible, but to make sure a bad two or three year stretch never forces a decision you would regret for the next twenty.

A hypothetical example: retiring at 62 with $700,000

Consider Mike and Elena, both 62, with $700,000 combined in traditional IRAs, a paid-off house, and $50,000 in savings. They need $6,000 a month to live comfortably. Neither has claimed Social Security. Mike's projected benefit at 67 is $2,200 a month; Elena's is $1,700, for $3,900 a month combined.

First, healthcare. An ACA silver plan runs about $1,700 a month on paper. By managing their taxable income carefully, they stay eligible for a premium tax credit and bring the net cost down to roughly $1,300 a month.

Second, they move $220,000 of IRA money into a hypothetical 5-year MYGA paying 5.25%. That produces about $11,550 a year in guaranteed interest, or roughly $962 a month, for five years regardless of what the market does.

Third, they start 72(t) distributions from a separate $140,000 IRA. Using a hypothetical calculation, their annual SEPP withdrawal comes out to about $7,840 a year, or roughly $653 a month.

Together, the MYGA and the 72(t) plan produce about $1,615 a month in guaranteed income before they touch their remaining $340,000 invested portfolio and $50,000 cash cushion. They draw about $4,385 a month from that portfolio to cover the rest. At 67, both claim Social Security, and the combined $3,900 a month cuts their portfolio withdrawal down to roughly $2,100 a month, stretching their savings considerably further than the original plan required.

Notice what the structure buys them: a fixed, contractual income stream for the five bridge years that does not care what the stock market does, paired with a portfolio that gets five extra years to recover from any downturn before it has to carry the full weight of their spending. That is the core idea behind bridging with guaranteed products rather than leaning entirely on withdrawals from day one.

Do not forget state taxes on retirement income

Where you retire changes the math more than most people expect. Some states tax IRA withdrawals and annuity income like ordinary wages. Others exempt pension and annuity income outright, and a handful skip income tax entirely. Check our guide to states that don't tax retirement income before you settle on where to spend these years.