When Should You Retire?

If there’s one question that people ask more than any other, it’s “What’s the best age to retire?” The answer depends on each person and their individual situations.

The standard retirement age for most people is 65. That’s when Medicare coverage kicks in, so you’ll be eligible for healthcare. Another common age is 67, since that’s when you can receive 100% of your calculated social security benefits.

However, those aren’t the only factors to think about. 

Choosing the right retirement age is all about balance. You want to make sure that you work long enough to save enough money and secure your financial future, but not too long so that you don’t have the time to do all the things you can to do.

Retiring Earlier

For a lot of people, the dream is to retire early. It can be incredibly liberating to leave the workforce at 55, for example. Work can obviously be a grind, even if you love what you do. You’re still expected to wake up every day and work away for at least eight hours. You still need to put off travel and checking items off your bucket list because you don’t have the time or the energy. You still need to structure your days (and your entire life) around your job.

Plus, if you leave the workforce before you turn 60, you’ll probably still be in very good health. There’s a good chance you’ll have a lot of energy, be free of major mobility issues, and have the strength and stamina you need to live the life you’ve always dreamed of.

However, the possible downside is the financial aspects. Saving for retirement is more up to individuals today than it was in the past. Many years ago, a lot of people had defined benefit pension plans. These promised a guaranteed lifetime monthly income, based on your salary and how long you worked. By the 1980s, defined-contribution plans. And 401(k) plans started to replace these pensions. Today, very few workers receive them. This means that saving for retirement today is largely up to the individual. Not only is it now primarily up to you to save for your own retirement (though some companies match a portion of the contributions made by employees), but these pensions are less predictable than in the past. Since your investments are tied to the stock market, a crash right as you retire can affect how much you have available to live off.

With rising costs, saving enough to retire can be very hard. In fact, these days, most Americans do not have enough to retire. 

Leaving the workforce early doesn’t just give you less time to save, it also gives your money less time to grow. One of the benefits of saving for retirement early in your career is that your investments compound over time. This also helps you deal with the uncertainty of the stock market, since it’s more likely that everything evens out over a long period. If you choose to retire early, it can be hard to have enough saved.

Since it’s tougher to access certain pensions or retirement savings accounts if you retire early (the earliest you can take Social Security is at age 62, and that’s at a reduced amount), your retirement income will depend entirely on your savings. Not having enough income can permanently hurt your retirement lifestyle.

Not only will you likely not have enough to do all the things you’ve always wanted to do, but stressing about affording bills and living expenses can turn retirement from a joy into an anxious nightmare.

Retiring before age 65 definitely has a lot of benefits, but it all depends on what you can afford. 

Retiring Later

Just like retiring earlier has potential risks and trade offs, so does staying in the workforce for longer. 

While delaying retirement can help you save more and put yourself in a better financial position when you stop working, it also limits the time you spend in retirement. The average life expectancy in the United States is 79 years. If you delay retirement until the age of 70, for example, that only gives you nine years out of the workforce. Not only does this mean much less time to do the things you want, but it may also become more difficult.

The reality is that health problems become more likely as you age. Even if you avoid significant issues and cognitive decline, it’s a reality that a lot of people have trouble with their knees, back, and joint as they age. By the time you hit your mid-70s, even the healthiest people have a bit more difficulty getting around and a bit less stamina than they did a decade ago. That can hamper your retirement lifestyle. 

However, if you enjoy your job and experience strong satisfaction, pride, and positive challenges from your work, staying in the workforce longer can be good for you. Many retirees struggle to find a purpose in their lives when they stop working. If your job is fulfilling and productive, working for longer can improve your happiness level and reduce your chance of cognitive decline. 

Figuring Out What’s Right for You

Most people aim to retire in their mid-60s. Retiring earlier or later have their own benefits and drawbacks. While these are important to recognize, there is no perfect retirement age that is right for everyone. You need to look at your job satisfaction, your physical condition, your health, your financial position, and your personal goals when you’re planning for retirement.

It’s also important to know that things can change. There are many situations where a person thinks they’re going to retire at a certain age but, as they approach that age, they feel like they should continue working. Sometimes it’s because they don’t have enough saved or sometimes it’s because they’re really enjoying their work and don’t want to stop.

The opposite happens as well. You may have planned to retire at 67, but by the time you’re 62, you’re fed up with your job. You look at your retirement savings, do some math, and realize that it’s possible to stop working earlier.  

There is no one-size-fits-all number that’s right for everyone, but there are a few questions you can ask yourself when you’re trying to come up with your perfect retirement age:

• Do you have debt? It’s often best to pay down your debts as much as possible before you retire. 
• Do you have savings? Estimate the annual income you’ll need to live comfortably in retirement, then figure out if your investments, pension plan, and government benefits cover that amount.
• What do you want to do in retirement? Try to retire at an age that makes achieving your dreams realistic.
• How happy are you at your job? Does your work make you miserable or are there things you still want to accomplish or achieve? This matters a lot.
• What is your health situation? If you put off retirement until later, will you still be healthy enough to live the life you want? If you retire today, do you have the funds available to pay for your medical care?

By asking yourself these questions and fully evaluating your situation, you’ll be able to come up with the ideal retirement age for you and your circumstances.