When you choose to retire is a very personal decision. We can't make it for you, and your spouse can't either (although he or she may want to chime in with suggestions). At the end of the day, nobody can make that decision but you.
All we can do is fill you in on some important information related to the best age to retire. So, that being said, what is actually considered by most retirees to be the best age to retire?
Retirement Age Survey Results
The average non-retired American plans to retire at the age of 66, according to a recent survey.
There has been little change in this projected retirement age in recent years, but it has increased over the past few decades. In fact, back in the 1990s, the average American was projecting retirement at age 60.
According to most people, they expect to retire between 65 and 67 years of age. However, Gallup polls indicate that people actually retire on average at 61 years old.
Why Do Some Retire Earlier or Later Than Planned?
While some seniors may be happy to have enough capital to retire earlier than planned because of the lower actual retirement age, that’s not always the case.
Some individuals retire earlier than intended because of job loss, personal health issues, or family situations like the need to care for an elderly parent.
On the other hand, others might find themselves compelled to work longer than planned due to financial difficulties in the same manner that circumstances could force some people to retire early. By the way, do you know what are the 3 types of retirement? Go to this page to learn more.
Controlling Your Retirement Age Decision
In life, one thing is quite clear and it is that nothing is certain. However, if you’ve saved steadily into your retirement fund and have been successful in your chosen career, you may have a certain amount of control over your decision.
In fact, it’s even possible to retire in your 50s (or even earlier) if you have been really successful. However, in order to avoid paying an early withdrawal penalty, it’s important that you have other sources of retirement income in addition to your 401(k) or IRA.
Many seniors make the mistake of thinking they can live off of their IRA or 401(k) when they retire early without taking into consideration that penalty and how much it can eat up their retirement fund.
How Do Your Genes & Overall Health Affect Retirement?
When determining your optimal retirement age, your health and expected lifespan should also be considered. Healthy parents who lived well into their late 80s or early 90s could be good news for you.
On the other hand, it could mean that retiring at 62 would require your savings to last 25 to 30 years.
If, however, longevity is not in your genes, or if you are already dealing with a medical condition that is expected to limit your lifespan, you may want to make other choices to draw on your funds sooner rather than later.
What Can Happen at Different Retirement Age Milestones?
Let’s look at some of the major age milestones in life at different ages that can seriously affect your retirement planning:
Age 55 & the Rules on Early Distributions
Generally, 401(k) funds cannot be withdrawn until age 59½ but with some exceptions. In the event that you leave or are terminated from your current employer before you reach 55, you may withdraw money from their 401(k) plan without penalty.
Making an early distribution has both pros and cons, however, so make sure that you fully understand the IRS rules before making a move.
Age 59½ & Penalty-Free Withdrawals
When you reach this age, you can start taking withdrawals from your pre-tax retirement accounts such as 401(k)s and IRAs. But, be sure to keep in mind that withdrawals now count as taxable income.
Age 62 to 65 & Social Security
62 is the youngest age when you can start getting Social Security. But if you take your full retirement benefits that early, they’ll be reduced to about 75 percent of what they would have been otherwise.
Additionally, it would remain at that same level (except for any cost of living increases) even once you have reached full retirement age.
Age 65 & Medicare Eligibility
Your Medicare enrollment should be completed at age 65 during the enrollment period even if you have private health insurance or even if you’re still working.
Be aware that failure to do so will result in a penalty. And, since standard Medicare doesn’t cover all costs, you might also want to consider adding a Medicare supplemental plan.
Age 66 to 67 & Your FRA
Technically, depending on your year of birth, your Full Retirement Age (FRA) will fall between 66 and 67.
As an example, if you were born in 1955, your FRA would be 66 years plus 2 months, while if you were born in 1959, your FRA would be 66 years plus 10 months. If you were born in 1960 or later, your FRA is 67.
Age 67 to 70 & Social Security Benefit Increases
If you delay taking Social Security until you turn 70, your benefits (if you haven't already taken them) will increase by 8 percent.
In other words, if your monthly benefit is $2,500 per month if you start at your FRA, your monthly benefit would be more than $3,300 per month if you could wait until you’re 70.
However, if you choose to delay in order to get 30 percent per month more later in life, you could also be losing out on four years of payments at the lower benefit amount.
If you delay until you reach 70, you could lose up to $120,000 in benefits, depending on your FRA. And in fact, it could take around ten years to fully recoup your total benefits.
That being said, if you won’t be needing your Social Security benefits during your late 60s and are fully expecting to live well past 80, opting to maximize your Social Security benefit by taking it later might be the best choice for you.
Age 70½ & Mandatory Retirement Plan Withdrawals
When you reach age 70½, you’re required by law to take money out of whatever pre-tax retirement plans that you may have, like IRAs and 401(k), as well as most annuities and pension plans. So, whether you need the dollars or not, better get it out of there.
Final Words About the Best Age to Retire
So, now that you know a little more about what we've researched regarding the best age to retire, we hope that you feel better able to make that decision for yourself.
After all, being armed with plenty of retirement data is your optimum way to make deciding as easy and painless as possible. And, if we've been even just a small part of making your life easier, then we're extremely happy. Happy Retirement!