Deciding when to retire is a very personal decision that depends on many factors. There is no one-size-fits-all answer for the best age to retire. Some people are eager to retire as early as possible, while others enjoy working and want to stay employed as long as they can. The ideal retirement age will vary based on your financial situation, health, family status, career satisfaction, life goals, and more. While the average retirement age in the U.S. is around 65, many people choose to retire earlier or later than this benchmark.
Some key considerations when choosing your retirement age include:
Financial Preparedness
One of the most important factors to weigh is whether or not you’ve saved enough to retire comfortably at a given age. The earlier you want to retire, the more diligent you’ll need to be about saving and investing during your working years. Most financial advisors suggest you need at least 70-80% of your pre-retirement income to maintain your standard of living once retired. Make sure you run the numbers to project your retirement savings, estimated Social Security benefits, and any pension income at different potential retirement ages.
Health
Your health and family medical history should be taken into account when deciding on retirement timing. Retiring early makes sense if you’ve had health issues or a stressful career that may take a physical toll. Working longer can allow you to retain employer health benefits. However, if you have chronic conditions, retiring earlier when you still have energy to enjoy life may be preferable. Consider your current health status as well as your goals for staying active and fit during retirement.
Career Status
Some people can’t wait to retire from jobs they dislike. But others derive great satisfaction and meaning from their careers well into their 60s or beyond. If your work is an integral part of your identity and sense of purpose, retiring at a traditional age may not be rewarding. On the flip side, those facing job burnout or layoffs may opt for early retirement. Take stock of your career satisfaction and prospects when considering retirement timing.
Spouse’s Retirement Plans
For married couples, coordinating retirement ages is crucial. You’ll want to discuss whether you and your spouse both want to continue working, or if one of you is ready for retirement. Retiring together can allow you to embark on new adventures and spend more time together. But a phased approach where one spouse works longer can also provide financial stability or allow more flexibility.
Lifestyle Goals
Your dreams for retirement will also influence your target age. Perhaps you can’t wait to travel the world, take up new hobbies, or move closer to family. If so, retiring early to have more freedom may be a priority. Alternatively, you may be very career-driven and want to continue working as long as possible. Think about the activities that will bring you joy and fulfillment in retirement when making your plan.
Factors That Support Retiring Early
While retiring at 65-67 is common based on when Social Security and Medicare benefits start, many people choose to retire earlier, most frequently in their early 60s or even late 50s. Here are some of the key factors that support retiring early:
Burnout from Work
If you’ve lost motivation and passion for your career, this is a major reason to consider early retirement. Lingering job dissatisfaction can affect your mental health and wellbeing over time. Determine how your work-related stress or unhappiness may lift after retiring.
Physically Demanding Career
Those in careers with significant physical demands may feel propensity to retire earlier. For example, construction workers, nurses, restaurant staff, and manufacturing workers are often on their feet all day and may retire as soon as possible.
Adequate Savings
Having sufficient retirement savings and sources of income apart from Social Security is key to affording an early retirement. If you’ve diligently built up a 401(k), IRA, or other nest egg, retiring in your 50s or 60s may be realistic.
Good Health
While health issues could prevent some from working longer, being in good health can support an earlier retirement. If you maintain an active lifestyle, retiring early means you can pursue hobbies like travel, sports, and more while you still have youthful energy.
Change of Priorities
For some, priorities may shift from career to family, relationships, or personal growth. Desiring more time for these pursuits is a reason to retire early.
Phasing into Retirement
Transitioning into retirement gradually via consulting, part-time work, or launching an encore career allows some to retire early from their regular job. This “phased retirement” lets you enjoy new freedom while still earning income.
Factors Supporting Working Longer
While early retirement is alluring for many, there are also good reasons to stay on the job into your late 60s, 70s, or beyond. Here are some of the key factors in favor of delaying retirement:
Financial Benefits
Continuing to work allows most to boost retirement savings further. You can keep contributing to accounts like 401(k)s and IRAs. Delaying allows you to lock in larger Social Security payments when you eventually claim benefits. Working longer before collecting Social Security can equate to permanently larger monthly payouts.
Access to Healthcare
One significant perk of working longer is retaining employer-subsidized health insurance, which can save substantially on premiums and deductibles compared to individual coverage or Medicare. Delaying retirement lets you leverage this benefit.
Professional Fulfillment
If you find deep purpose and meaning in your work, why retire? For stimulating or satisfying careers, continuing to work provides intellectual and creative stimulation. The social connections with colleagues can also be hard to replicate.
Staying Active and Engaged
The transition to retirement can be mentally and emotionally difficult for some as they lose their sense of purpose. Missing the activity and routine of work is another common challenge. Continuing to work helps maintain an engaged lifestyle.
Supporting Family
Some near retirement age prefer to work longer to financially support children or aging parents. The earnings, healthcare access, financial security, and other job benefits can provide peace of mind.
Personal Preference
Individual mindset and temperament play a major role. Those who link their self-esteem heavily to their career may be averse to retirement. Some simply enjoy the stimulation and social interaction of work. Personal outlook shapes preferences on working longer.
Target Retirement Ages
Given the factors above, here are some common target retirement ages to consider:
Age 62
– Minimum age you can begin claiming Social Security retirement benefits
– Allows early retirement while benefits are reduced compared to waiting
– Provides income if retiring early due to health or career reasons
– Can bridge gap until later ages when pensions or full Social Security start
Age 65
– Full retirement age for Social Security for those born in 1937 or earlier
– Enables Medicare eligibility at 65 to have health coverage
– Many opt to work to this traditional retirement milestone
– Age when penalties for early Social Security claiming are lower
Age 66-67
– Full retirement age to receive full Social Security benefits for those born in 1960 onward
– Health coverage still available through employer benefits or Medicare
– Allows maximizing Social Security payments by waiting to claim
– Some opt to work to this newer ‘normal’ retirement age
Age 70
– Age to maximize Social Security benefits through delayed claiming
– Continued income and health insurance while you delay Social Security
– Maintains career engagement and fulfillment longer
– Enables higher savings contributions in later working years
Age 72
– Mandatory age to begin withdrawing minimum amounts from retirement accounts like 401(k) plans and traditional IRAs to avoid penalties
– Allows even longer career, health benefits, and retirement savings deferrals
– Appeals to those who wish to work indefinitely for personal or financial reasons
Early Retirement Strategies
If aiming to retire significantly before 65, careful advanced planning is required. Here are some strategies to make early retirement feasible:
Live Below Your Means
To build savings, diligently practice frugal living and budgeting during your working years. Aim to save 20% or more of your income. Limit housing, transportation, dining, and consumer costs.
Max Out Retirement Accounts
Be diligent about fully funding workplace retirement plans like 401(k)s. Also consistently contribute the maximum to IRAs each year. Take advantage of catch-up contributions at 50+.
Invest Aggressively
Invest savings in diversified portfolios tilted toward stocks for growth. Be comfortable with prudent risk to allow your money to compound sufficiently.
Downsize Home
Consider moving to a smaller home before retirement to eliminate mortgage costs and unlock home equity. Lower housing costs support retiring earlier.
Relocate
Moving to areas with lower taxes and costs of living can stretch retirement savings further. For example, retirees flocking to Florida can make retirement dollars go up to 20% further.
Phase Into Retirement
Transition to retirement via part-time work, consulting gigs, or launching a small business. This allows added income before completely stopping work.
Delay Social Security
Wait until at least full retirement age, if not 70, before claiming Social Security to lock in higher monthly payments.
Is Retiring Early Risky Financially?
While liberating, retiring significantly before 65 carries some financial risks to weigh. Early retirees need to plan carefully and maintain diligent money management to avoid these pitfalls:
Depleting Savings Too Soon
With longer retirements, retirees risk spending down assets too quickly in their 60s and 70s and having little leftover later. Conservative withdrawal rates of 3-4% are recommended.
Underestimating Spending
Higher costs for travel, healthcare, and entertainment earlier in retirement can equal shortfalls if not properly budgeted for. Be realistic about spending.
Rising Inflation
Inflation averaging 3% annually can quickly erode purchasing power in decades-long retirements. Factor this in projections.
Market Volatility
If retiring into a down market, it elevates sequence of returns risk. Brace portfolios with ample cash reserves if retiring near market peaks.
Reduced Social Security
Claiming benefits before full retirement age reduces monthly Social Security income for life. Wait as long as possible to claim.
No Work Income
Loss of earned income can be difficult to adjust to psychologically and financially. Some part-time work may help the transition.
Rising Healthcare Costs
Medical costs tend to rise significantly as you age. While Medicare helps at 65, early retirees may pay more for insurance and out-of-pocket costs.
Best Ages to Retire for Different Groups
The ideal retirement age further depends on your demographic factors and situation:
For Singles
Those without spouses may opt to work longer to sustain income, healthcare, and social connections. Waiting to retire fully to at least mid-60s when Medicare kicks in can also make sense financially. However, if you have sufficient assets, retiring early allows pursuing hobbies and passions.
For Couples
One spouse retiring first allows staggered income and benefits. However, retiring together enables shared adventures and freedom. Target ages will depend on health, careers, and financials. Retiring close together is ideal for strong relationships.
For Parents
Retiring before children complete their education can provide more parental support. But some may work longer to assist children financially first. Optimal ages hinge on individual family needs and resources.
For Childfree Adults
Without kids’ expenses, childfree individuals may retire earlier comfortably. However, they forfeit child-related benefits like grandchildren interactions by retiring too soon. Balance desires with maintaining an active, socially-engaged life.
For Women
Women’s longer life expectancies supports working longer to hedge longevity risk. But family caregiving demands may encourage earlier retirement. Optimizing income sources and savings is crucial.
For Men
Shorter male life expectancies may warrant earlier retirement. However, career identity and income factors often compel working longer. Avoid overworking at expense of health and life fulfillment.
For Entrepreneurs
Business owners often work past traditional retirement ages due to passion for their ventures. However, divesting companies or interests gradually can enable phased retirements.
For Public Sector Workers
Earlier retirement ages for public employees coupled with pensions allow earlier retirements, often in their mid-50s. But second careers may provide engagement after.
Key Considerations by Age
Here is a breakdown of factors to weigh as you approach different retirement age milestones:
Before 50
– Have you met envisioned career goals? Or want to pursue higher role?
– Kids may still be in college – can you support them?
– In peak earning years – participating fully in retirement plans?
– Any high-interest debt should be paid off
– Most assets should still be invested aggressively for growth
Age 50-55
– Reassess career objectives – move up or change roles?
– Kids are likely independent – reduced family costs
– Implement catch-up contributions to retirement plans
– Weigh pros and cons of phased retirement or new ventures
– Plan for healthcare costs before Medicare eligibility at 65
Age 55-60
– Pinpoint desired activities, relationships, purpose in retirement
– Discuss timing preferences with spouse if applicable
– In final high earning period – save as much as possible
– Fine tune retirement budget, income sources, cost of living
– Model different Social Security claim strategies
Age 60-65
– Set target retirement date considering finances, health, and plans
– Consult professionals to review portfolio, income plan, insurance
– Determine optimal timing to claim Social Security and pensions
– Explore relocating if desired to stretch savings
– Consider part-time, interim, or encore work to transition
Age 65-67
– Give employer sufficient notice if officially retiring
– Sign up for Medicare and supplemental coverage
– Claim Social Security based on claiming strategy
– Adjust spending and portfolio withdrawals for retirement life
– Have wills, powers of attorney in place for estate plan
Age 70+
– Ramp up RMDs from retirement accounts
– Review investments to balance growth, income, safety
– Continue active, healthy lifestyles and social engagement
– Update estate planning documents as needed
– Enjoy retirement with sense of purpose and fulfillment
Conclusion
Choosing when to retire depends greatly on your individual circumstances. While early retirement appeals to many, working into your late 60s or beyond can also be very rewarding. Assess your financial readiness, health outlook, career status, retirement goals, and obligations to target an age range that works for you. Retiring too hastily without careful planning risks regret and financial issues. But delaying retirement indefinitely if you have the means to stop working also carries opportunity costs. With prudent planning tailored to your situation, identifying the retirement sweet spot that maximizes enjoyment and purpose in your later years is certainly achievable.