Can I Retire At 62 With $600,000 In A Roth IRA, $1,700 In Monthly Rental Income And By Taking Early Social Security Benefits?

Retirement planning is a complex process that requires careful consideration of various income sources and expenses. For those considering early retirement, evaluating financial assets is crucial. This scenario examines the practicality of retiring at age 62, given a particular financial situation. The person has saved $600,000 in a Roth IRA, receives $1,700 monthly in rental income and plans to draw early Social Security benefits. 

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Financial Assets Analysis

Roth IRA Savings

A Roth IRA balance of $600,000 can significantly support retirement. These accounts offer tax-free withdrawals, a notable advantage for retirees.

Using a conservative 4% withdrawal rate, the Roth IRA could provide $24,000 yearly or $2,000 monthly.

Rental Income

A monthly rental income of $1,700 amounts to $20,400 annually, contributing steadily to the retirement income pool.

Social Security Benefits at 62

In 2023, the average Social Security benefit for 62-year-old retirees is about $1,277 per month​​. The early claim reduces benefits compared to full retirement-age benefits.

Total Retirement Income Estimation

The combined income from Roth IRA withdrawals, rental income and Social Security benefits would range from around $4,977 to $5,277 per month, or approximately $59,724 to $63,324 annually.

Comparing this with the guidelines provided by financial advisers, the person's income in retirement exceeds the recommended 70% to 90% of their preretirement income. It surpasses the 2022 median income of $50,290 annually for households headed by someone older than 65, as reported by the U.S. Census Bureau. This suggests that, under these circumstances, the person may have a financially secure retirement, assuming their preretirement income aligns with or is above the median. 

Considerations For Early Retirement at 62

Cost of living and inflation: It’s crucial to consider living expenses, lifestyle and the impact of inflation over a potentially long retirement period.

Healthcare costs: As Medicare eligibility begins at 65, budgeting for private health insurance until then is important.

Longevity of savings: Ensuring that retirement savings last throughout retirement years is essential.

REITs As A Source of Rental Income

For those looking to supplement their retirement income, real estate investment trusts (REITs) offer an alternative way to generate rental income without the direct ownership and management of properties. Here’s a brief overview:

Consistent dividend income: REITs distribute a substantial portion of their income as dividends, providing a regular income source, especially appealing to retirees​​.

Diversification benefits: Adding REITs to a portfolio introduces diversification, helping to mitigate risk as they belong to a different asset class from traditional stocks and bonds​​.

Liquidity and capital appreciation potential: REITs, traded on stock exchanges, offer liquidity and the potential for capital appreciation over time​​.

This information is not financial advice. Individual circumstances vary greatly, and what works for one may not be suitable for another. For a comprehensive and personalized retirement plan, it is best to consult a qualified financial adviser. A professional can provide guidance tailored to individual financial situations and goals, ensuring retirement planning is on the right track.

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