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When to Retire and Why Age Matters


When is the right time to retire? It’s a question that depends on your personal needs and circumstances. The National Bureau of Economic Research found that “retirement improves both health and life satisfaction” but the age at which you retire impacts the quality of your retirement.

The age at which you retire will affect your finances. Depending on your financial situation, determine what age makes the most sense to retire for you so that you may enjoy retirement comfortably.

Key Takeaways

  • Rules surrounding Social Security benefits established age 65 as a common retirement age.
  • Men retire at an average age of 64.6 years, while women remain at work until age 62.3.
  • Retirees at the age of 65 qualify for Medicare benefits.
  • Depending on the year you were born, postponing taking Social Security until age 70 can make your monthly benefit 32% larger than it would be at your full retirement age.
  • As part of SECURE 2.0, Congress raised the age at which retirees are required to make minimum distributions on select retirement accounts. The required age is now 73 years old.

Retiring at Age 65 or Earlier

By the time employees reach their 50s and early 60s, they’re often thinking of retirement. Men retire at an average age of 64.6 years, while women remain at work until age 62.3.

The original rules surrounding Social Security benefits established age 65 as the retirement age when workers could receive unreduced retirement benefits. In 2023, the Social Security full retirement age is 66 for those born between 1943 and 1959, and 67 for anyone born in 1960 or later.

An individual’s retirement savings, health benefits, and social security commonly dictate the best time to stop working and vary by age.

Pension Plans and IRAs

If retiring before age 65, some individuals, such as federal employees, can withdraw retirement plan savings at age 55. At age 59½, all employees can withdraw money from their qualified plans and IRAs without an IRS penalty for early withdrawal. Individuals who delay retirement must start required minimum distributions (RMDs) from retirement plans. Though the required minimum distribute age used to be 72, the U.S. Congress increased the RMD age to 73 as part of SECURE 2.0, a section of H.R. 2617.

Chances are that you’ll need a large nest egg to supplement your Social Security funds, especially if you hang it up very early and retire before age 65. The earlier you retire, the more you’ll need. According to Fidelity Investments, individuals retiring at age 65 should aim to have 12x their pre-retirement salary saved and plan an annual withdrawal rate throughout retirement of 4.2%.

Social Security

Individuals who retire at 65 or earlier and claim benefits from Social Security will only receive 75% of the full amount and the benefit for a spouse decreases also by 30% of the full retirement amount. Retiring at ages 66–67 will glean a full Social Security benefit, depending on when you were born and age 70 is the latest age to start receiving Social Security benefits.

Individuals can retire at age 65 or earlier, collect Social Security retirement benefits, and work at the same time before their full Social Security retirement age. However, benefits will be reduced if you earn more than the yearly earnings limits.

Medicare and Health Benefits

Retiring at age 65 allows individuals to be eligible for Medicare, otherwise early retirees will need to budget for out-of-pocket costs to purchase health insurance.

An individual applying for health insurance in 2022 that complied with the Affordable Care Act (ACA) paid an average of $585 per month in premiums (before any premium tax credits). By contrast, for 2023, the standard Medicare Part B premium is $164.90 per month and it gets you coverage with a relatively low deductible of $226 a year. Both figures are lower compared to 2022.

To be well protected, consider prescription drug coverage (Medicare Part D) and perhaps Medigap—or Medicare Advantage. Prescription drug coverage (Medicare Part D) premiums average $31.50 a month in 2023. Medicare Advantage (Part C) premiums average $18 a month in 2023.

Medigap is private insurance designed to supplement traditional Medicare and prescription drug coverage. Note that if you don’t sign up for prescription drug coverage when retiring at age 65 along with Medicare, you can pay a higher penalty rate for it when you do sign up for the rest of your life—unless you are covered by an employer drug plan.

Financial experts recommend that your retirement income should be about 80% of your final pre-retirement annual earnings.

Retiring After Age 65: Ages 66 to 70

For many, the upper 60s is the golden mean of retirement timing—you’re old enough to have built up a nice financial reserve and young enough to enjoy your job-free years. The fact that you’ll get your full Social Security payment at age 66 to 67 can make a huge difference, especially if you’re relatively healthy and likely to have an average or longer-than-average retirement.

Waiting also gives you a few extra years to shore up your tax-advantaged investment accounts. Investors who are at least 50 years of age can make an annual catch-up contribution to their 401(k) or IRA. For 2023, those 50 or older can contribute $7,500 to a traditional IRA or Roth IRA, up from $7,000 in 2022. If you use a 401(k) to save for retirement, you can defer up to $30,000 of your salary in 2022 after you reach the age of 50.

Also, waiting until you hit 65 means that you are eligible for Medicare, which is typically a fraction of the cost of individual insurance plans for older adults.

Normal retirement age—the age at which you receive full Social Security benefits—gradually increases to 67 for anyone born in 1960 or after.

Late Retirement: Age 70 and Older

If you love what you do for a living, the advantages of working into your 70s are readily apparent. For everyone else, a protracted career might sound like the last thing they’d ever want.

Nevertheless, consider the advantages. For one, you’ll have more time to bulk up your savings. You’ll also benefit from the highest possible Social Security payout. Benefits increase on a prorated basis until you reach age 70 when they’re 132% of your full amount if you were born between 1943 and 1954. And if you were born in 1960 or later, your benefit would increase by 124%.

The upshot is that if you plan well, you’ll have more money to do the things you truly love, and you’ll have fewer worries about outliving your assets. And if you stay healthy, you’ll still have many years to enjoy the freedom of being retired.

Of course, delaying retirement isn’t always a choice, for a variety of reasons. Research published by Northwestern Mutual in 2021, for example, found that the economic impact of the COVID-19 pandemic has changed the retirement plans of many Americans. Almost a quarter (24%) plan to retire later than previously expected.

At What Age Is Early Retirement?

Leaving the workforce before the traditional age of 65 is typically considered early retirement.

You can start collecting Social Security retirement benefits as early as age 62, but you won’t receive your full benefits. For anyone born between 1943 and 1954, for example, full benefits don’t kick in until age 66, and for those born after that, the full-benefit age is a little older.

How Old Do You Have to Be to Retire?

The full retirement age, or the age you need to be to collect full Social Security benefits, is 66 years and two months for those born in 1955 and will gradually increase to 67 for those born in 1960 or after. How old you have to be to retire comfortably depends on the lifestyle you want to have and how much you have saved. The earlier you retire, the larger the nest egg you will need.

What Is the Average Retirement Age in the U.S.?

The average retirement age for women and men differs. On average, women retire at 62.3 years and men at 64.6 years.

The Bottom Line

Many older people can’t wait for the day when they finally call it quits on their careers and retire. Still, constantly worrying about finances isn’t exactly the way to spend your later years. That is why it’s important to consider when you should actually retire rather than focusing on the age at which you are eligible to collect retirement benefits. Before deciding, make sure you have the resources to make the most of this new stage of life.


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