If you’re eligible for full, normal retirement at a young age, there’s a lot to think about. Do you plan on starting a second career? What are your plans for health insurance? How long might you need to wait to access personal savings or Social Security? We’ll take a quick look at each of these elements to hopefully point you in the right direction.

For our purposes, we’ll define “retiring at a young age” as retiring before age 65, as 65 is when most are eligible for Medicare - a big factor for most when thinking about retirement.

Health Insurance

Many don’t realize how expensive health insurance can be when they aren’t yet eligible for Medicare, and they don’t have an employer subsidizing their health insurance. To give an example of the possible disparity between Medicare-eligible and pre-Medicare medical insurance rates: for plans offered through the ASRS in 2021, premiums range between $0 and $67 a month for a single-coverage Medicare plan (aka, a plan that covers only you – no spouse or dependents) while rates for single coverage non-Medicare ASRS retirees are between $775 and $1,361 a month1. That’s a huge difference and one that catches a lot of people off guard!

If you plan on retiring at an early age, be mindful of how you plan on obtaining health insurance. Will you have a working spouse whose plan you can join? Will you be starting a second career and getting insurance through your employer? Both are options that could save you money.

Personal Savings

A common bit of advice you’ll often hear us tell our members - have personal savings! Your ASRS pension is meant to be just one part of your overall retirement income, with personal savings and Social Security rounding out your retirement finances. However, even if you’ve followed our (very smart) advice and have a well-funded supplemental savings account, such as a 401(k), you might find you can’t withdraw funds without a financial penalty if you aren’t 59 ½ years old when you retire. A 10% penalty is common for these types of savings accounts, in addition to the typical taxes and fees involved. You may need to decide whether you’re willing to accept the penalty or willing to wait to access these funds. Either way, make sure to research the rules specific to your type of savings account, so you have a plan in place.

Also, unlike your ASRS pension, which is guaranteed for life, personal savings are a finite resource – if you start withdrawing from it at an earlier age than you initially planned, it could run out. Make sure to do the math and figure out a budget, so you can stretch it as much as you need to.

Social Security.

If Social Security is part of your retirement strategy, you’ll also need to research how early you’re able (and willing) to take it. The age you’re able to receive full benefits varies, falling between 66 and 67 depending on your age. The earliest you’re able to receive Social Security benefits is age 62, and you’ll be taking a reduced benefit – an estimated 29% lower benefit than what your full Social Security would be. Also, Social Security benefits vary from person to person depending on work history, age, and how much you’ve paid into Social Security. To get an idea of how much your Social Security benefit could be, visit SSA.gov , where you can use their online estimator to see a personalized estimate of your future benefit.

Starting a Second Career

This is often the solution for those who can retire at an early age, and may solve many of the potential hurdles we’ve already discussed. Receiving both a paycheck from an employer and your ASRS pension2 could bridge the financial gap, allowing you to leave your personal retirement savings alone (or even keep adding to it) until there’s no penalty to withdraw, while also allowing you to wait to take Social Security benefits. If you work for an employer that offers health insurance, it could also help you avoid those high, unsubsidized non-Medicare health insurance rates.

Whether you’re thinking of retiring this year or in five years, at age 45 or 70, it’s never too early to start forming a plan! You could even find that the best option is to delay your retirement, if you're close to hitting the next multiplier in your pension calculation3. For additional food for thought, visit our Retirement Central page at AzASRS.gov.

1 These are rates the ASRS has currently negotiated with UnitedHealthcare for Plan Year 2021. There are many places to source health insurance with varying levels of coverage and rates, but you’re likely to find a similar level of cost disparity between Medicare and non-Medicare medical plans. Once on Medicare, the government starts subsidizing your health insurance costs, allowing insurance companies to offer much lower monthly premiums than to those not eligible for Medicare. Back

2 Visit our Return To Work page for additional info on working after retirement.

3 Graded Multipliers are part of your pension calculation, with the multiplier increasing the more years of service you have. For more information, visit our Estimate Your Benefits page

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