I'm 61 with just $250K saved but I'm desperate to retire — is claiming Social Security early my only way out?

His wife, who’s in her 50s, doesn’t work, and their two adult children moved out a couple of years ago. Ron would love to step away from his job early and have some time to himself, but with only $250,000 in retirement savings and a household that depends solely on his income, he’s worried about how they’ll manage down the road.

He knows he can claim his Social Security benefits at 62, but is that his only solution here? Or could it end up just compounding the couple’s issues later on?

How to maximize Social Security benefits

Although Ron could technically start collecting Social Security at 62, he’d have to get by on a smaller monthly payment — whereas if he waits, he’ll qualify for a bigger check. But can he actually afford it?

For someone born in 1960 or later, the full retirement age (FRA) is 67. Claiming five years earlier will cut his benefit by roughly 30%. On the flip side, waiting until 70 has the opposite effect, increasing it by 24% over the FRA. For someone with limited savings, like Ron, that higher monthly payment could make a significant difference over the next few decades.

Say his benefit at 67 is $2,500 a month. Ron would get about $1,750 a month if he started collecting at 62, compared with $3,100 if he held off until 70. That’s a difference of $1,350 a month, or $16,200 a year. That extra money could go a long way, particularly with his wife relying on the same household income. But he’d need to figure out how to cover the bills.

Ray R. Harris, founder and president of Social Security Claiming Expert, told Moneywise that Ron shouldn’t assume that leaving work and claiming Social Security have to 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 isn’t necessarily a mistake, but it does mean accepting a smaller monthly payment for the rest of his 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 his estimated benefits at different ages and see how much more he’d receive by waiting. That could give him a better idea of whether he can afford to wait or needs the money sooner.

He and his wife will need to take a close look at the benefits available to both of them before making a decision, 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 explains that a surviving spouse may qualify for a higher benefit if the primary earner delays claiming. “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 popular 4% rule, Ron could withdraw $10,000 in his first year of retirement. A recent estimate from Morningstar puts the starting rate at 3.9% for a 30-year retirement, which works out to $9,750 a year, or about $813 a month before taxes — arguably not enough to sustain a two-person household.

Eustache Clerveaux, a CFP, says Ron should be cautious about retiring with that amount saved. A 4% withdrawal would give him just $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.”

Considering he’s still in his early 60s, Ron could have 30 years (or more) of retirement ahead of him. If the market takes a hit just as he starts pulling from his savings, he could end up having to withdraw more than he’d initially planned to cover his bills.

Harris, meanwhile, cautions that Ron needs to look at his savings as a temporary source of income, rather than something that can replace his paycheck indefinitely.

“$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 making a decision, the household budget needs a line-by-line review. Housing, groceries, car payments and other everyday bills will all have to come out of their retirement income. Health insurance is another expense to plan for, and Ron won’t qualify for Medicare until he turns 65.

Finding a compromise for Ron

Scott Ward, a CFP, told Moneywise that Ron should look for a different job that offers the benefits he needs while giving him 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.”

However, that doesn’t mean Ron has to continue working full-time hours at a job that doesn’t bring him joy or a sense of accomplishment. Part-time hours or some consulting work could prove immensely satisfying on a personal level while bringing in enough to cover a few bills and leave his savings alone for longer. Even an extra $750 a month adds up to $9,000 a year. That’s nearly as much as he’d withdraw from his savings under the 3.9% guideline.