When to retire and the best age to retire differs from person to person depending on their personal preferences and circumstances. Today’s article talks about the best ages for retiring based on these two factors.
In this article:
- The Best Age to Retire: Before 66 Years Old (Early Retirement)
- Best Age to Retire for Balancing Financial Security and Enjoying Retirement: Between 66 and 70 Years Old (Normal Retirement)
- Best Age to Retire for Social Security: After 70 Years Old (Late Retirement)
- The Best Retirement Age
How to Know When to Retire | The Best Age to Retire: Early, Normal, or Late?
The Best Age to Retire: Before 66 Years Old (Early Retirement)
That’s why many workers tend to burn out even before they reach the retirement age of 66 years old. It’s no wonder many believe the best age to retire is before 66 years old, which is considered early retirement.
In 2019, the average early retirement age for Americans is 63 years old, according to the U.S. Census Bureau. Based on gender, the average early retirement ages are 64 and 62 for men and women, respectively.
More than just chronic workplace stress, people are aiming for early retirement for health reasons.
The National Bureau of Economic Research reported in a 2015 paper that retirement leads to better health and life satisfaction. Part of this conclusion was forced early retirements due to health reasons.
Pros of Retiring Early
The first one is the ability to start anew.
By retiring early, people can start doing what they want to do instead of what they have to do. Early retirement provides a window to change careers or pursue a personal calling outside the corporate or business world.
Another benefit of retiring early is having more time to enjoy life while one is still healthy and strong.
Many people put off active traveling, passion projects, or spending time with family until retirement. Unfortunately, many retirees aren’t as healthy or strong as they used to be to enjoy those things during most of their retirement years.
By retiring early, people can have more time to enjoy what matters most to them.
Cons of Retiring Early
Now, let’s talk about the cons of early retirement.
With opportunities to live significantly less stressful and more satisfying lives, why don’t many people retire early? The answer lies in their finances.
- Retiring early means more retirement living years to fund and fewer years to save for retirement. For many people, this can make their working years more stressful, which can increase certain age-related health risks.
- Retiring early involves costlier access to retirement funds. When a person makes withdrawals or distributions from certain retirement accounts before retirement, they’ll have to pay taxes and/or penalties.
- Early retirement requires having huge savings. Otherwise, people who retire early may suffer from greater stress and anxiety due to unmet needs.
- Consider one significant impact of early retirement on Social Security benefits. While people who retire early at 62 years old are eligible to receive Social Security benefits, they could get more if they retired before turning 66 or 67 years old.
- Those who retire early at 62 years old will only receive 75% of the full monthly benefits from Social Security. Their spouses will only get 35% of the total amount compared to 50% if they retired at 66.
- Another financial implication of retiring early that requires a larger nest egg to pull off is Medicare eligibility. Americans can only qualify for Medicare after turning 65, which means early retirement requires provisions for costly health insurance.
To get an idea of how costly health insurance can get, consider a report by insurance broker eHealth on the cost of health insurance for adults between ages 55 and 64.
In general, early retirement requires a much higher savings level because living expenses continue while income generally stops.
A popular rule of thumb for ensuring an adequately funded regular retirement is 25 times the annual expenses minus Social Security. This means if current yearly expenses are $30,000, then one will need $875,000 in savings to retire comfortably by age 65.
Always remember that the earlier the retirement, the larger the required nest egg.
Best Age to Retire for Balancing Financial Security and Enjoying Retirement: Between 66 and 70 Years Old (Normal Retirement)
The best part about retiring at 66 is Social Security eligibility, which can make a huge financial difference. This is especially true for retirees who’ll most likely live longer because of good health.
Another reason why retiring between 66 and 70 years old is the opportunity to maximize tax-advantaged retirement accounts. People 50 years and older can put in up to $6,000 more annually into such accounts by way of catch-up contributions.
Those 50 years old and above can contribute an extra $1,000 annually to Traditional or Roth IRAs, with maximum annual contributions of $7,000. The catch-up contributions for 401(k)s are $6,000, with maximum contributions of $25,000 annually.
Those who retire early won’t be able to take full advantage of catch-up contributions.
Cons of Normal Retirement
While the ideal retirement age lies between 66 and 70 years old, it also has its own share of potential disadvantages under certain circumstances.
The first disadvantage applies to people who haven’t saved and invested enough for retirement. Retiring at this age means they won’t have enough funds in their retirement income to last them through their sunset years.
Another potential disadvantage of retiring normally is limited time to enjoy retirement. People with degenerative conditions may regret retiring at age 66 or older instead of earlier when their poor health conditions keep them from enjoying the fruits of their labor in retirement.
Best Age to Retire for Social Security: After 70 Years Old (Late Retirement)
For people who love what they do for a living, retiring after 70 years old is the best age to retire. There are two very important reasons for this.
When a person loves their job, it’s not a job but a passion project. It’s rare for someone to get tired of working on their passion.
But since finances are the most crucial part of retirement, then the best reason is money. Late retirees have the opportunity to maximize both retirement funds and Social Security benefits.
With Social Security benefits, in particular, one can get 132% of the full amount when they apply at age 70 and above.
However, late retirement isn’t the best age to retire for most Americans. In fact, it’s not even an option but a necessary burden they have to bear.
This is because most Americans aren’t prepared to retire financially.
Based on the National Institute on Retirement Security’s 2018 report, 4 of 5 working Americans have less than a year’s income in their retirement accounts. Even worse, based on the report, 57% don’t even have retirement accounts or savings.
When you consider these two main findings of the report, the result is even more alarming. The median retirement account balance for all working Americans, both with and without retirement accounts, is $0.00.
Given that most American workers aren’t financially ready to retire, it’s no wonder late retirement is the best age to retire for some people. In some cases, retirement isn’t even an option for older workers.
Cons of Late Retirement
For those who absolutely hate their jobs, late retirement can be a cruel punishment. It’s the worst way to spend much of one’s retirement years, particularly if one delays retirement out of necessity.
While later retirement means maximum Social Security benefits, waiting to max them out runs the risk of substantial health deterioration. By the time Social Security benefits start, the retiree may no longer be healthy enough to enjoy those benefits.
For example, what good are maximum Social Security benefits if one can’t travel with their spouse, children, or grandchildren? Or what good are the additional Social Security benefits if retiring late leads to becoming ill and spending all of the additional benefits on medicines or medical care?
The Best Retirement Age
Retiring between 66 and 70 is the best option for those who want to have enough money to retire and be able to enjoy it.
For those who love what they’re doing, the best age to retire is 70 and beyond. In fact, there may not be any best age to retire for people like them.
How to decide when to retire? The best age to retire is dependent on a person’s financial condition, lifestyle, and how much they love their job.
For those who don’t like their jobs that much, early retirement is ideal. Those who love their jobs may find late retirement ideal for them.
For those who want to strike a balance between adequately financed retirement and the ability to enjoy it, between 66 and 70 years old or normal retirement may be the best age to retire.
At what age do you want to retire? Let us know in the comments section below!
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Editor’s Note: This post was originally published on January 13, 2019, and has been updated for quality and relevancy.