You’ve been saving for decades, and now you want to retire or withdraw funds — perhaps earlier than the full retirement age. If you withdraw funds before the full retirement age or decide to retire early all together, here are some things you may want to consider.

IRA, 401(k)

If you take an early withdrawal (if allowed) from a retirement plan— IRA, 401(k), etc. — before you reach age 59 ½ and you don’t meet the requirements for an exception – such as disability, medical, military – you will likely have to pay an additional 10 percent early withdrawal tax on early distributions.

Social Security

This isn’t technically classified as a penalty, but if you retire before the full retirement age, your benefits will be reduced. You can start receiving Social Security benefits as early as age 62, but your benefits may be reduced drastically. For example, according to the Social Security Administration, if your full retirement age is 67, but you retire at 62, your retirement benefit is reduced by 30 percent.

Pension

If you have a pension through your employer, you likely won’t be able to collect your pension until you reach your pension plan’s retirement age. Some plans may allow an early retirement, but the amount of your monthly payout will likely be smaller.

Health Care

The minimum age to qualify for Medicare is 65. If you retire before you reach that age, you’ll need to think about how you’ll obtain health care coverage. This could be an important matter to consider if you’ve depended on employer-based health coverage throughout your working years.

We Can Help.

Your Farm Bureau agent can help you discuss your retirement goals and ways to achieve the retirement you want. Connect with your Farm Bureau agent to discuss possible additional income options.

Sources:

https://www.irs.gov/taxtopics/tc558.html

https://www.ssa.gov/pubs/EN-05-10043.pdf

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals

http://time.com/money/collection-post/2791224/can-i-take-pension-benefits-early/

https://www.ssa.gov/planners/retire/agereduction.html