Best Age to Retire: Find the Perfect Time for You
Retirement marks a significant milestone in anyone's life, presenting an opportunity to relax, try new hobbies, and spend more time with family and friends.
Choosing the best age to retire is essential for your retirement plan.
But what is the best age to retire?
For most individuals, the typical retirement age hovers around 65 or 66, which is when you can start receiving your full Social Security retirement benefits.
However, depending on your financial situation, personal needs, and future goals, retiring earlier or later might suit you better.
In this guide, we will look at several factors that influence retirement age, the pros and cons of retiring at different ages and provide helpful insights to assist you in making informed decisions about when to retire.
What is the Best Age to Retire for You?
One of the biggest concerns when planning for retirement is making sure you don’t run out of money.
You need to save enough during your working years to cover your expenses from retirement until the end of your life.
Choosing when to retire depends on several factors:
- The lifestyle you want to have in retirement.
- Where you want to live.
- How much money you will need each month and each year to maintain that lifestyle.
- How much you are currently saving and what assets you have.
- Your investment strategy and willingness to take risks.
However, there are other factors to consider:
- If you are in good health and expect to live a long life, you might want to retire later to save more money.
- If you have health issues or a family history of chronic diseases, retiring sooner may be better so you can enjoy your retirement years.
- Consider how much you will spend on healthcare and if you might need long-term care.
- If you enjoy your work, you may choose to stay on longer and if you feel tired or unhappy, you might want to retire earlier.
- If you have a pension, find out when you can start receiving benefits and how much those benefits will be.
(For Social Security, you can start receiving benefits as early as age 62, but waiting until age 70 can significantly increase your monthly payment)
- Check your retirement accounts, like your 401(k) or IRA.
- Think about the effects of withdrawing money early or waiting to access it.
Early Retirement
As employees reach their 50s and early 60s, they often start thinking about retirement.
Originally, the retirement age for full Social Security benefits was set at 65.
In 2024, the full retirement age is 66 for people born between 1943 and 1959, and 67 for anyone born in 1960 or later.
But, how soon can you retire?
At age 55, you might be able to withdraw money from your 401(k) plan without a 10% penalty if you leave or lose your job.
There are advantages and disadvantages to this, so be sure to understand IRS rules on early withdrawals.
You can start withdrawing money without penalty from your pre-tax retirement accounts, like a 401(k) or traditional IRA, when you turn 59½. Keep in mind that these withdrawals will be taxed as income.
On the other hand, a 457 Retirement Plan also allows you to withdraw funds before age 60 without paying penalties.
The earliest age to start taking Social Security benefits is 62.
If you take benefits this early, your monthly amount will be reduced to about 75% of what you would get if you waited until full retirement age at 66-67.
Although, you can still choose to collect Social Security benefits while still working.
For health coverage, people aged 65 and older can enroll in Medicare. If you retire before age 65, you will need to plan for health insurance costs.
Pros and Cons of Retiring Early
Early retirement can offer you the chance to live a different lifestyle because you won’t have to work.
You might want to travel, start a business, or spend more time volunteering.
However, there are drawbacks to consider.
The earlier you retire, the longer your savings must last.
You should also think about how early retirement will affect your Social Security and Medicare.
You can start receiving Social Security at 62, but you can’t get Medicare until you’re 65.
Therefore, your retirement plan should focus on financial health and planning a retirement income that supports the life you want for the long term, ideally until you’re over 90.
Retiring at a Normal Age
The best age to retire is between ages 65 and 70.
At this age, you have solid savings and can enjoy your retirement, so you don't need to worry much about spending on nice things.
If you retire at age 66 or 67, you will receive your full Social Security payment, which can greatly benefit you, especially if you are in good health and expect to have a longer retirement.
Delaying retirement gives you the chance to boost your contributions to tax-advantaged investment accounts.
You can also sign up for Medicare, but consider adding a supplemental plan because standard Medicare does not cover all expenses.
Pros and Cons of Retiring at a Normal Age
If you wait until your normal retirement age to start receiving Social Security benefits, your benefits will not be reduced.
You can keep your employer’s health insurance and apply for Medicare when you turn 65, as long as you are still working.
Retiring at a normal age helps you adjust to a new lifestyle and makes the transition from work to retirement easier.
Working longer can also increase your investments’ compound interest and unlock financial success.
However, this means you might need to work longer than you want or delay your ideal retirement.
If you are unhappy in your job, waiting to retire could lead to more dissatisfaction.
Delayed Retirement
Between the ages of 67 and 70, if you haven't claimed your Social Security benefits yet, you'll see an increase of 8% for each year you wait to start receiving them until you reach age 70.
Essentially, this means that your Social Security benefit could be over 30% higher at age 70 compared to taking it at your full retirement age.
At age 70½, you must start withdrawing funds from any pre-tax retirement accounts you have, including 401(k)s, IRAs, and most pensions and annuities, as required by law.
This gives you more time to save money and invest. You will also receive the highest possible Social Security benefits.
People who love their jobs can choose to delay retirement until their 70s.
If you plan carefully, you will have more money to enjoy the things you love and less worry about outliving your savings.
If you stay healthy, you will have many years to enjoy the freedom of retirement.
Pros and Cons of Retiring at a Normal Age
Delaying retirement can be a personal choice of confidence or a necessity.
Some people enjoy their jobs and want to keep working, while others may need to work longer because they started saving late or faced financial challenges.
Staying in the workforce can also provide social interactions and a sense of purpose.
One benefit of delaying retirement is that you can increase your Social Security benefits.
Waiting can raise the amount you receive. Additionally, you can keep contributing to retirement accounts like a 401(k) or IRA.
However, working longer can lead to fatigue and lower job satisfaction.
You might also miss out on experiences and opportunities if you choose to work longer.
Planning for Retirement: Steps to Take
To choose the best age to retire, follow these steps:
1. Check Your Finances
Look at your money situation. Review your assets, debts, income, and expenses. Keep track of your monthly income and costs to find ways to save.
2. Consider Your Retirement Income Options
Find out what income sources you have, such as Social Security, pensions, and retirement savings.
3. Know Your Health Insurance Needs
Research health insurance options, including Medicare and other policies. Think about long-term care insurance to protect yourself against future health issues.
4. Set Retirement Goals
Decide what you want to do in retirement, such as travel, hobbies, or spending time with family. Create a timeline for when you want to achieve these goals.
5. Partner with a Financial Advisor.
A financial advisor like Bloom Financial, can help you create a personalized retirement plan.
They can provide insights into investments, taxes, and estate planning.
In Summary
The ideal age to retire varies based on your personal circumstances, goals, investments, retirement income, and the kind of lifestyle you envision once you stop working.
Your relationship with your job also plays a significant role—some people love their careers and choose to postpone retirement for as long as possible, while others are eager to retire early to enjoy life and fulfill their dreams.
Ultimately, only you can determine what’s right for you, given your unique situation.
Working with a financial advisor can help you understand your options and plan for the future you want.
At Bloom Financial, we are dedicated to helping people achieve their dream retirement.
Schedule a call with us today.
