Deciding when to retire is one of the biggest financial decisions a person will make in their lifetime. The ideal retirement age depends on many factors, including a person’s health, financial situation, and career satisfaction. While there is no single “perfect” age to retire, most financial planners recommend targeting retirement between ages 62 and 70 to maximize Social Security benefits and retirement savings.
What are the most common retirement ages?
In the United States, the most common ages that people retire are:
- 62 – Early eligibility age to claim Social Security retirement benefits
- 65 – Full retirement age for Social Security for people born in 1937 or earlier
- 66 – Full retirement age for Social Security for people born between 1943 and 1954
- 67 – Full retirement age for Social Security for people born in 1960 or later
- 70 – Age when Social Security benefits max out
According to a 2021 survey from Gallup, the average retirement age in the U.S. is 66. Men tend to retire a little later than women, at an average age of 67 vs. 64 for women. Retirement ages also tend to vary by education, as those with higher levels of education often have jobs they enjoy and want to keep working in.
When can I claim Social Security retirement benefits?
You can claim Social Security retirement benefits as early as age 62, but your benefit amount will be permanently reduced compared to waiting until your full retirement age:
| Age You Claim Benefits | Full Retirement Age 66 | Full Retirement Age 67 |
|---|---|---|
| 62 | 75% of full benefit amount | 70% of full benefit amount |
| 63 | 80% of full benefit amount | 75% of full benefit amount |
| 64 | 86.7% of full benefit amount | 80% of full benefit amount |
| 65 | 93.3% of full benefit amount | 86.7% of full benefit amount |
| 66 | 100% of full benefit amount | 93.3% of full benefit amount |
| 67 | 108% of full benefit amount | 100% of full benefit amount |
| 68 | 116% of full benefit amount | 108% of full benefit amount |
| 69 | 124% of full benefit amount | 116% of full benefit amount |
| 70 | 132% of full benefit amount | 124% of full benefit amount |
As the table illustrates, waiting to claim benefits until your full retirement age or even longer (up to age 70) results in significantly higher monthly Social Security income. However, claiming early at 62 can make sense if you have health issues or minimal savings.
How does my career factor into when to retire?
Your occupation and career satisfaction play a big role in determining your ideal retirement timing. According to the Employee Benefit Research Institute, these are some key factors to consider:
- Physical job demands – Those in physically demanding jobs like construction, manufacturing or nursing may need to retire earlier.
- Job flexibility – Some careers allow phased retirement or shifting to part-time, enabling a gradual transition.
- Job satisfaction – People who gain purpose and enjoyment from their work often want to delay retirement.
- Workplace policies – Some employers have mandatory retirement ages or age limits for certain positions.
Think carefully about your job duties, work environment and organizational policies as you establish your preferred retirement timeline. Consulting your employer about retirement transitions well in advance can be helpful.
How much retirement savings will I need?
One of the key factors that determines when you can realistically retire is how much you have saved for retirement. To enjoy a comfortable lifestyle in retirement, experts estimate you will need approximately 70-80% of your pre-retirement income each year from a combination of Social Security and your retirement savings.
For example, if your current annual household income is $100,000, you would aim to have around $70,000-$80,000 per year in retirement income. Use a retirement calculator to estimate how much savings you will need to generate your target income level.
Ideally you should have 8-10 times your ending salary saved by retirement. If you are falling behind on retirement savings, you may need to delay retirement a few additional years to allow your investments more time to compound and grow.
Does retiring early impact my Social Security?
Yes, retiring before your full retirement age (currently 66 or 67 for most adults) will impact your Social Security benefit amount, as discussed earlier. However, you can still claim Social Security as early as age 62 even if you are not fully retired by reducing your work hours.
To receive full Social Security benefits, you will need to fully retire and wait until at least full retirement age to start claiming benefits. Even if you retire early at 62, you will get the largest monthly payments by waiting until your full retirement age to take Social Security.
Am I eligible for Medicare if I retire early?
You will be eligible for Medicare starting at age 65 regardless of your retirement status. People who retire earlier than 65 can get health insurance through COBRA, their spouse’s plan, or by purchasing private insurance or coverage on the health insurance marketplace plans.
Keep in mind that Medicare does not cover all health expenses, so most retirees need to budget for Medigap or Medicare Advantage premiums, deductibles and copays. Long-term care is also not covered and requires separate insurance.
How will retiring early impact my taxes?
Retiring early may reduce your tax burden, since you will have lower income in your early retirement years. Pre-tax 401(k) contributions and medical expenses are some of the main levers to reduce taxable income in retirement.
Your required minimum distributions (RMDs) from retirement accounts will begin at age 72 regardless of your work status. RMDs are taxed as ordinary income. With careful planning, it is possible to be in a lower tax bracket during early retirement.
What should I consider if I am married?
If you are married, you and your spouse should both thoughtfully consider your ideal retirement timelines and financial preparedness. Planning your retirement together has many advantages:
- Coordinating your Social Security claim strategies can optimize lifetime income for the household.
- Pooling your retirement savings can give you more flexibility and options.
- Discussing your visions for shared activities and travel in retirement helps align plans.
- Understanding your respective health conditions and family health history informs timing.
Try to find an age range you both feel comfortable with for retirement. For example, you may target 68 for the higher earner and 65 for the lower earner if you want a phased retirement.
How long will retirement last?
Life expectancies are an important factor in determining how long your retirement finances will need to last. According to the U.S. Social Security Administration:
- The average life expectancy for a 65-year-old man is 84 years.
- The average life expectancy for a 65-year-old woman is 86.5 years.
However, about 25% of people reaching age 65 will live past 90. To be safe, it is prudent to plan for a retirement that could last 25 years or more. Working just a couple additional years allows you to pad your retirement savings to support a longer time horizon.
Can I go back to work after retirement?
Many people consider returning to work on a part-time basis or trying an encore career for fulfillment and social interaction after full retirement. Phased retirement can provide continued income and allow you to delay tapping your retirement savings. Be sure to understand how wage income may impact Social Security benefits and taxes.
Starting a small business, freelancing, consulting and seasonal work are flexible options. Having a plan for meaningful volunteering or hobbies is also wise to stay active and engaged in retirement.
Conclusion
The optimal age to retire depends on weighing many personal and financial factors in your life. While there is no universal “perfect retirement age” the key considerations include:
- Current savings and projected retirement income
- Health, life expectancy and family history
- The physical and cognitive demands of your career
- Your passion and satisfaction with your work
- Having clarity on your ideal retirement lifestyle
Thoroughly researching your benefits options, running projections of your income sources, and planning expenses will allow you to select a retirement age aligned with your goals and resources. Consult knowledgeable financial and legal professionals for guidance on optimizing decisions around the timing of your retirement.