At 61 with $250,000 Saved, He Wants Out of the Workforce — Is Early Social Security the Answer?

Ron has spent the past couple of years finding it increasingly hard to drag himself out of bed and into the office each morning. Now 61, he feels worn out by the routine, bored with the 9-to-5 grind, and ready to reclaim some of the life he has worked so long to build.

He has about $250,000 set aside for retirement, but the idea of staying in the workforce for another six years feels overwhelming.

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His wife is in her 50s and does not work, while their two adult children moved out a few years ago. Ron would like to leave his job early and spend more time on his own, but with retirement savings of only $250,000 and a household that depends entirely on his paycheck, he is uneasy about what comes next.

He knows Social Security can be claimed at 62, but is that his only option? Or could taking benefits early make the couple’s financial picture worse later on?

How to maximize Social Security benefits

Ron can start Social Security at 62, but doing so would mean a smaller monthly benefit. Waiting would increase the payment, though the real question is whether he can afford to delay it.

For people born in 1960 or later, full retirement age is 67. Filing five years early reduces benefits by about 30%, while waiting until 70 boosts them by 24% above the full retirement age amount. For someone with limited savings, that larger check could matter a great deal over time.

For example, if Ron’s benefit at 67 were $2,500 a month, he would receive roughly $1,750 a month at 62, or about $3,100 a month if he waited until 70. That is a gap of $1,350 each month, or $16,200 a year. That extra income could be meaningful, especially since his wife depends on the same household budget. Still, he would need a way to pay the bills in the meantime.

Ray R. Harris, founder and president of Social Security Claiming Expert, told Moneywise that Ron should not assume retiring and claiming benefits must happen at the same time.

“Retiring at 62 and claiming Social Security at 62 are two different decisions,” he says. “People often treat them as a package deal, but they don’t have to be.”

Harris says claiming early is not automatically wrong, but it does lock in a smaller monthly benefit for life. “It’s a trade: more checks sooner in exchange for a smaller check for the rest of your life.”

Ron can use the Social Security Administration’s my Social Security account to compare estimated benefits at different ages and see how much more he would receive by waiting. That could help him judge whether delaying is realistic or whether he needs the money sooner.

He and his wife should also review the benefits available to both of them before deciding, Harris says. “For a one-earner couple, the Social Security decision is a two-person decision. The person who claims first may not be the person who lives longest.”

He adds that a surviving spouse may be eligible for a higher benefit if the primary earner waits longer to claim. “If Ron delays past full retirement age, the delayed credits he earns can increase the benefit available to an eligible surviving spouse.”

How to make $250K in savings last

Using the commonly cited 4% rule, Ron could withdraw $10,000 in the first year of retirement. A recent Morningstar estimate pegs the starting withdrawal rate at 3.9% for a 30-year retirement, which would equal $9,750 a year, or about $813 a month before taxes — likely not enough to support a two-person household.

Eustache Clerveaux, a CFP, says Ron should be careful about retiring with that amount saved. Under a 4% withdrawal rate, he would have only $10,000 in the first year, which Clerveaux describes as “not much to support two people, particularly with rising healthcare and living costs.”

“The less someone has saved, the more important Social Security becomes,” he told Moneywise. “For Ron, Social Security will likely be the foundation of his retirement income, making the timing of his claim especially consequential.”

Because he is still in his early 60s, Ron could have 30 years or more of retirement ahead of him. If the market drops just as he begins drawing from savings, he may need to withdraw more than expected to cover expenses.

Harris also warns that Ron should view his savings as a short-term income source, not something that can replace a paycheck forever.

“$250,000 can be a useful bridge, but it is not a pension,” he says. “The plan must show where the income comes from after the bridge ends.”

Before Ron makes any move, the household budget needs a careful review. Housing, food, car payments and other everyday expenses will all need to be covered by retirement income. He also needs to account for health insurance, since he will not qualify for Medicare until age 65.

Finding a compromise for Ron

Scott Ward, a CFP, told Moneywise that Ron may want to look for a different job that provides the benefits he needs while offering more flexibility. “A phased retirement would allow Ron to change jobs, maintain a health-insurance benefit and possibly even save more for retirement,” he says.

“Sometimes, the best job isn’t the one that pays the most. It’s the one that offers the benefits you need the most for just the right amount of time.”

That does not mean Ron has to keep working full-time at a job that no longer gives him satisfaction. Part-time work or consulting could offer a better balance, while still bringing in enough to cover some expenses and allow his savings to last longer. Even an extra $750 a month adds up to $9,000 a year, which is close to what he would withdraw from savings under the 3.9% guideline.

Clerveaux says even $10,000 to $20,000 in annual part-time income could help Ron reduce portfolio withdrawals and postpone Social Security. “Retirement does not have to be an on-or-off switch. It can be a gradual transition,” he says.

Harris also recommends that Ron think about moving out of full-time work gradually rather than treating retirement as an all-or-nothing choice. “Even modest earnings can reduce withdrawals and give Ron more flexibility.”

He further suggests checking whether the household could cover expenses a bit longer without starting Social Security right away. “Using earnings or carefully planned savings withdrawals to delay may secure a larger monthly benefit later, which can also matter for his wife as a potential survivor.”

In the end, Ron and his wife need to map out what they spend each month, how much income they can rely on, and where they can cut back. Downsizing their home or managing with one car, for instance, could reduce monthly expenses.

If the numbers still do not work, he will know before turning in his resignation, instead of discovering the problem after the paychecks stop.