At 62, having $910,000 saved seems like a clear signal that retirement is finally within reach. Yet an impressive account balance can produce far less monthly income than many people expect.
For someone spending $60,000 a year, even a portfolio near $1 million may struggle to cover every expense before Social Security begins. Health insurance, taxes, and a market decline early in retirement can make the decision more complicated.
That is why continuing to work can be a financial strategy rather than a sign of failure. The reasoning becomes clearer when the savings are compared with actual retirement expenses.
The $910,000 Retirement Question Most People Overlook
Consider David, a hypothetical 62-year-old American who has accumulated $910,000 in retirement investments. He has spent decades saving, earns enough to cover his current expenses, and wants to know whether he should finally leave his job.
His savings are substantial, but the number alone does not answer the retirement question. What matters is how much income those investments can provide without creating an unacceptable risk of running out of money.
A traditional retirement planning guideline suggests beginning withdrawals near 4% of a portfolio’s value. More recent research from Morningstar suggests that a lower starting rate may be appropriate for people expecting a particularly long retirement.
Here is what different initial withdrawal percentages would mean for David’s $910,000 portfolio.
| Initial Withdrawal Rate | Annual Amount | Monthly Amount |
|---|---|---|
| 3% | $27,300 | $2,275 |
| 3.5% | $31,850 | $2,654 |
| 3.9% | $35,490 | $2,958 |
| 4% | $36,400 | $3,033 |
These amounts are before any taxes owed on withdrawals. They are illustrative starting withdrawals, not guaranteed income or promises that the portfolio will last indefinitely.
Morningstar’s retirement income research published in 2025 estimated a 3.9% starting withdrawal rate for a 30-year retirement under its base assumptions and a 90% probability of funds remaining. Its longer-horizon analysis estimated approximately 3.5% for a 35-year period under specified portfolio assumptions.
At 62, David could reasonably plan for his money to support him into his 90s. That makes the length of retirement just as important as the size of his savings.
His Spending Needs Matter More Than His Savings Milestone
Suppose David estimates that his desired retirement lifestyle would cost $5,000 per month. That means he needs $60,000 annually before considering unexpected expenses or changes in his circumstances.
With $910,000 invested, withdrawing $60,000 during the first year would mean taking approximately 6.6% of his portfolio. That is considerably higher than the starting withdrawal percentages often used in long-term retirement planning.
The problem becomes easier to understand when the spending target is compared with the portfolio’s potential contribution.
At a 3.5% initial withdrawal rate, David’s investments would provide approximately $31,850 annually. That leaves a gap of $28,150 before Social Security, pension income, or other sources are considered.
Once Social Security begins, the picture may change considerably. But if David retires at 62 and wants to delay claiming benefits, he needs a credible plan to cover that gap during the intervening years.
There is another distinction worth making. Having a $910,000 net worth is not the same as holding $910,000 in accessible investments, especially if much of that wealth is tied up in a home.
For this example, David’s full $910,000 is assumed to be invested. Someone whose million-dollar net worth includes $400,000 of home equity would face a different income calculation.
The Three Years Before Medicare Can Change Everything
One important reason for delaying retirement at 62 is health insurance. Most Americans become eligible for Medicare at 65, creating a three-year coverage gap for someone who leaves employment at 62.
David currently receives employer-sponsored health insurance. Retiring would mean replacing that coverage through another source, such as a spouse’s employer plan, an Affordable Care Act Marketplace policy, or potentially COBRA coverage for a limited period.
The cost depends on where he lives, household income, available plans, and subsidy eligibility. Premiums are only one part of the calculation because deductibles, prescription costs, and out-of-pocket expenses also matter.
Imagine that David budgets an additional $9,000 annually for replacing his employment-based coverage. This is a hypothetical planning amount, not a national average or a quote for a Marketplace policy.
Over three years, that adds $27,000 before accounting for healthcare inflation or unexpected medical needs. If his original $60,000 spending estimate did not include this coverage, his early retirement budget would be noticeably higher.
HealthCare.gov confirms that people who lose job-based insurance through retirement can generally qualify for a special enrollment period. Marketplace financial assistance depends partly on household income, which can include taxable retirement withdrawals.
That creates a connection many early retirees overlook. Taking additional money from a traditional IRA may increase taxable income and affect Marketplace premium tax credit eligibility.
Continuing to work for another two or three years can therefore protect investments while maintaining access to employment-based insurance. However, the value of that benefit depends on the employer’s contribution and the cost and quality of alternative coverage.
Social Security at 62, 67, or 70 Changes the Calculation
For someone turning 62 in 2026, Social Security’s full retirement age is 67. Claiming at 62 generally produces a retirement benefit 30% below the full retirement benefit.
Waiting beyond 67 can increase the benefit through delayed retirement credits. For people born in 1960 or later, claiming at 70 generally produces 124% of the full retirement benefit before considering other changes.
Suppose David’s estimated monthly benefit at full retirement age is $2,400. The following comparison illustrates how the claiming decision affects his monthly income.
| Claiming Age | Monthly Benefit | Annual Benefit |
|---|---|---|
| 62 | $1,680 | $20,160 |
| 67 | $2,400 | $28,800 |
| 70 | $2,976 | $35,712 |
These are simplified hypothetical estimates based on one full retirement age benefit. They exclude future cost-of-living adjustments, additional earnings changes, taxes, and other factors that may affect actual benefits.
The difference between claiming at 62 and 70 would be $1,296 per month, or $15,552 annually. That difference could be especially meaningful later in life, when Social Security may represent a larger share of household income.
For married couples, delaying the higher earner’s benefit may also increase the potential survivor benefit. The actual outcome depends on each spouse’s earnings record, claiming ages, and applicable benefit rules.
Waiting is not automatically the correct decision, however. Health, family longevity, immediate income needs, and the cost of funding the waiting years all deserve consideration.
David’s situation demonstrates why working longer and claiming Social Security later are separate decisions. He might stop working at 65 and delay benefits until 70, provided his investments can support the gap.
Working While Claiming Can Have Another Consequence
Someone who claims Social Security before full retirement age and continues earning wages may encounter the retirement earnings test. For 2026, the annual earnings limit for people under full retirement age throughout the year is $24,480.
Generally, Social Security withholds $1 in benefits for every $2 earned above that limit. Different rules apply in the year someone reaches full retirement age, and a special monthly rule can apply in the first year of retirement.
For example, annual wages of $50,000 exceed the 2026 limit by $25,520. Under the general rule, that would result in $12,760 of benefits being withheld, subject to the person’s actual benefit entitlement and other applicable rules.
Withheld benefits are not simply forfeited forever. Social Security recalculates benefits at full retirement age to account for months when benefits were withheld under the earnings test.
David may therefore find little immediate benefit in claiming while continuing to work full time. The calculation changes if he leaves full-time employment, works fewer hours, or has other reasons to claim earlier.
Five More Years of Work Could Make a Large Difference
The strongest financial argument for continuing to work may be the combined effect of avoiding withdrawals and allowing investments more time to grow. Additional retirement contributions can make the difference even larger.
Consider three hypothetical choices David could make at 62. Each starts with $910,000 invested and assumes a steady 4% annual nominal return for five years.
In the first scenario, he retires immediately and withdraws $50,000 at the end of each year. In the second, he continues working, covers expenses from earnings, and makes no additional contributions.
In the third, he continues working and adds $20,000 to his investments at the end of each year. All three scenarios use the same assumed investment return so that the effect of the different decisions is easier to compare.
| Scenario | Annual Portfolio Cash Flow | Portfolio at 67 |
|---|---|---|
| Retire at 62 | Withdraw $50,000 | $836,338 |
| Work until 67 | No withdrawals or deposits | $1,107,154 |
| Work until 67 and save | Contribute $20,000 | $1,215,481 |
The figures assume annual compounding and end-of-year cash flows. They exclude investment fees, taxes, inflation, and changes in asset allocation, and they are mathematical illustrations rather than investment forecasts.
Under these assumptions, continuing to work and saving another $20,000 annually leaves David with approximately $379,000 more at age 67 than retiring immediately and withdrawing $50,000 per year.
That difference is not simply the $100,000 he contributed during the five years. It also reflects investment growth and the withdrawals he avoided by remaining employed.
Of course, investment markets rarely deliver a smooth 4% return every year. Some years produce gains, others produce losses, and the actual difference could be much smaller or larger.
The lesson is that additional working years can improve retirement readiness in several ways at once. They may reduce the number of years investments must support, prevent early withdrawals, and provide opportunities for additional savings.
Age 62 Offers a Valuable Retirement Savings Opportunity
Another reason David might continue working is the opportunity to make larger retirement contributions. Federal retirement rules provide enhanced catch-up contribution limits for certain workers in their early 60s.
For 2026, the IRS set the regular employee contribution limit for many 401(k) plans at $24,500. Workers ages 60 through 63 may qualify for an enhanced catch-up contribution of $11,250 if their plans permit it.
That creates a potential employee contribution limit of $35,750 for eligible participants in these plans during 2026. Employer matching contributions may add to the amount invested.
However, not everyone can afford to contribute the maximum. The contribution rules also differ across plan types, and certain higher-earning employees must make catch-up contributions on a Roth basis under the rules effective in 2026.
For someone already close to retirement, these contribution opportunities can be meaningful. A few additional years of saving may strengthen the portfolio without requiring a major lifestyle change.
Still, maximizing retirement contributions should not come at the expense of essential spending, expensive debt, or health. A contribution limit describes what the law permits, not what every worker needs to contribute.
The Market Risk David Would Face if He Retired Now
Retirement creates a particular investment challenge because withdrawals may continue even while account values fall. Financial planners call this sequence-of-returns risk.
The concept is straightforward. A large market decline early in retirement can be more damaging than a similar decline much later, because money withdrawn from a reduced portfolio cannot participate in a subsequent recovery.
Suppose David retires with $910,000 invested and experiences a 20% market decline. His portfolio would fall by $182,000, leaving approximately $728,000 before any retirement withdrawals.
If he then withdraws another $50,000, the balance would decline to $678,000. Recovering to the original $910,000 would require a subsequent gain of roughly 34%, assuming no further withdrawals or deposits.
That does not mean David should avoid stocks or attempt to predict a market crash. It means the order of investment gains, losses, and withdrawals can significantly influence retirement outcomes.
One response is to maintain enough liquid reserves and appropriate lower-volatility investments to avoid depending entirely on selling stocks during a downturn. Another is to adopt flexible spending rules that reduce discretionary withdrawals after poor market years.
Continuing to work can provide additional flexibility because employment income may cover essential spending while the portfolio fluctuates. However, that protection disappears if David loses his job or must leave work unexpectedly.
A sensible retirement plan should therefore work under more than one market scenario. It should account for lower returns, several years of inflation, and the possibility that the worker cannot remain employed as long as planned.
The Tax Problem That Can Follow a Large Retirement Account
Nearly $1 million in a retirement account does not necessarily mean nearly $1 million is available for spending. The account type determines how withdrawals are treated for income tax purposes.
Money withdrawn from a traditional 401(k) or deductible traditional IRA is generally taxable as ordinary income. Qualified Roth withdrawals are generally tax-free, while taxable brokerage accounts follow a different set of rules.
Suppose most of David’s $910,000 is held in traditional retirement accounts. He may need to withdraw more than his desired after-tax spending amount to cover his federal and applicable state income taxes.
A $50,000 withdrawal is not automatically $50,000 of spending money. Its after-tax value depends on his other income, filing status, deductions, and state tax rules.
There is also a later-life planning issue. Under current law, someone turning 62 in 2026 generally reaches the required minimum distribution age of 75.
Required minimum distributions, commonly called RMDs, are withdrawals that the IRS requires from certain tax-deferred retirement accounts. These mandatory distributions may increase taxable income later in retirement.
That could affect David’s federal income taxes and potentially his Medicare premiums through income-related adjustments. It may also influence how much of his Social Security benefit is subject to income tax.
Some retirees consider partial Roth conversions during lower-income years after leaving employment. These conversions can create current taxes in exchange for different future tax treatment, but they do not automatically reduce lifetime taxes.
For David, the years between stopping work and beginning required distributions could offer planning opportunities. The best approach depends on tax brackets, income needs, account balances, healthcare coverage, and future expectations.
The Important Retirement Ages David Is Approaching
Retirement planning becomes easier when major age-based rules are considered together. These milestones create opportunities, but they do not all require an immediate decision.
For someone who is 62 in 2026, the following ages are particularly relevant.
| Age | Important Milestone | Planning Implication |
|---|---|---|
| 62 | Earliest Social Security retirement claiming age | Claiming reduces monthly benefits |
| 65 | Typical Medicare eligibility begins | Review enrollment and insurance choices |
| 67 | Full Social Security retirement age | Full retirement benefit and no earnings test |
| 70 | Maximum delayed retirement credits reached | Further claiming delays add no credits |
| 75 | General RMD age for this birth cohort under current law | Plan for taxable mandatory withdrawals |
These rules serve different purposes. Medicare eligibility, for example, does not require someone to retire or begin Social Security.
Someone working at 65 may be able to delay Medicare Part B enrollment without penalty if they have qualifying coverage through current employment. The rules depend on the type of coverage and can be different for employees of smaller businesses.
After qualifying employment or employer coverage ends, an eight-month Medicare Part B special enrollment period generally applies. COBRA coverage does not extend that deadline.
This is why retirement timing should be treated as a series of decisions rather than one event. David can choose when to stop working, when to claim Social Security, and how to coordinate healthcare separately.
But Working Longer Has Costs That Money Cannot Measure
So far, the financial case for continuing to work appears strong. However, a retirement decision that considers only money can overlook other important costs.
David is 62, and his health, relationships, interests, and available time matter. Five more years at work may increase his investments, but they also represent five years he cannot use in quite the same way.
If his job is physically demanding, stressful, or interfering with his health, the extra income may come at a personal cost. The same applies if his spouse has already retired or he has important caregiving responsibilities.
On the other hand, work can provide structure, meaningful relationships, intellectual stimulation, and a sense of contribution. Some people genuinely want to remain employed even when they can afford to stop.
The problem arises when continuing to work becomes automatic rather than intentional. A person might repeatedly postpone retirement because every new savings milestone creates another target.
Behavioral finance describes a tendency called loss aversion, in which people feel the pain of losses more strongly than the pleasure of comparable gains. For a longtime saver, the thought of spending accumulated investments can feel uncomfortable even when the financial plan supports it.
This helps explain why some people with substantial retirement assets still hesitate to leave work. The anxiety may come partly from a lifetime of saving habits rather than a measurable financial shortfall.
David needs to distinguish between a genuine income gap and fear of seeing his investment balance decline. The first requires a financial solution, while the second may require a clearer spending plan and more confidence in the assumptions.
Retirement at 62 Is Not the Only Alternative to Working Until 67
The decision does not have to be between full-time employment and permanent retirement. David could consider a transition that reduces his working hours while preserving some income.
For example, suppose he could earn $25,000 annually through part-time work. That amount could cover a substantial portion of his $60,000 retirement budget, potentially reducing the amount he needs from investments.
Such work would not necessarily provide employer-sponsored health insurance or the same retirement benefits. David would need to account for payroll taxes, self-employment expenses where relevant, and the physical demands of the arrangement.
A phased retirement could also help him understand how he wants to spend his time. He might discover that a three-day workweek offers enough structure and income without requiring another five years of full-time employment.
Other options include reducing large fixed expenses, postponing expensive travel for a period, or relocating to a lower-cost area. Each choice has tradeoffs, especially when housing, family proximity, and healthcare access are considered.
A smaller spending target can sometimes accomplish what another year of work would achieve. But cutting expenses should not become an excuse to abandon the activities that make retirement worthwhile.
How David Can Know When He Has Enough
The most useful retirement decision is based on a household’s actual financial requirements. It should not depend entirely on a round savings number or the retirement age of friends and coworkers.
David needs to compare reliable income, planned investment withdrawals, taxes, and healthcare expenses against his expected spending. He should then test whether that plan remains workable if retirement lasts longer or markets perform poorly.
The following framework helps identify the decisions that deserve attention before leaving work.
| Planning Question | What to Calculate | Next Step |
|---|---|---|
| Can savings support spending? | Annual expenses minus reliable income | Test multiple withdrawal rates |
| Is healthcare covered? | Premiums and out-of-pocket costs before Medicare | Compare available plans |
| When should benefits begin? | Social Security at 62, 67, and 70 | Review personal SSA estimates |
| Can the portfolio handle losses? | Impact of an early market decline | Review investment mix and reserves |
| Is working longer worthwhile? | Added savings versus time and lifestyle costs | Set a target retirement date |
| What will taxes cost? | After-tax income from each account | Prepare a withdrawal strategy |
The key is to turn uncertainty into measurable choices. If David can cover his expenses under several reasonable scenarios, continuing to work becomes a preference rather than a financial necessity.
If the calculations reveal a substantial shortfall, another year or two of work may offer a meaningful improvement. He can then make that decision with a specific goal instead of simply waiting to feel wealthier.
One Unexpected Finding About Retirement Readiness in 2026
David’s uncertainty would not be unusual. The Employee Benefit Research Institute’s 2026 Retirement Confidence Survey found that 61% of workers felt confident they would have enough money to live comfortably throughout retirement, down from the previous year.
The same survey found that the median expected retirement age among workers was 65, while the median actual retirement age among retirees was 62. Nearly half of retirees reported leaving work earlier than they had planned.
These findings highlight an important limitation in any strategy built around working longer. People cannot always control when their careers end.
Health changes, family responsibilities, layoffs, and workplace conditions can force retirement earlier than expected. A plan that depends entirely on remaining employed until 67 may therefore be less resilient than it initially appears.
David should prepare for two possibilities simultaneously. He can plan to keep working while also making sure that an unexpected retirement at 63 or 64 would not leave him without a workable income strategy.
That includes understanding his health insurance options, keeping an appropriate emergency reserve, monitoring essential expenses, and checking his Social Security estimates. It may also mean avoiding financial commitments that assume his current salary will continue indefinitely.
Working longer is a useful option, but it should never be the only protection built into a retirement plan.