Deciding on the best age to retire usually comes down to three main factors: health, financial well-being, and family, says Douglas Jackson, CFP, EA, of Nashville. Although everyone’s situation is different, “typically one or all of these factors will play a part in helping someone decide if it’s time to retire,” he says.
Given the anxieties that can arise related to retirement, it’s not always easy to know when the right time is for you. For some, 55 might feel right. For others, it might be 62, 65, 67, or 70.
If you’re starting to think about retirement, a great place to start is to look at your financial situation. Your personal best age to retire “is going to depend not only on how much you have saved in your retirement account but also how much your living costs are each year,” says Anna Barker, a personal finance expert with LogicalDollar.
Here’s what you need to know about retirement at several common ages.
Retiring at 55
Retiring early, or before age 65, generally comes down to assets. Do you have enough to support yourself without any additional income? Since you can’t tap into IRA accounts without a penalty until age 59 ½, you’ll need to have money from other sources, such as pensions and/or 401(k) accounts, which can be accessed at this age, though usually at a reduced amount. There are online tools that can help you assess how close to retirement you are.
There are several advantages to retiring at 55, says Ann Wood, operations manager at Prime Financial Services in Wilton, Conn. At 55, adults in good health can enjoy traveling, relaxing, or spending time outdoors, she says, without “the daily stresses of working life.” To retire at 55, “you need to have enough money saved to sustain yourself for decades. You need to be prepared to ensure that you don’t outlive your savings.”
A common rule of thumb used to assess financial readiness for retirement is 25 times your annual expenses, says Barker. For example, if you need $50,000 to live on, you should have at least $1.25 million set aside.
Fidelity, on the other hand, advises having seven times your salary saved at 55. Using the same $50,000 as a salary figure, the recommended retirement amount would be $385,000. That multiplier rises to 10x by age 67.
“Generally, early retirement (age 50-60) is only possible if an individual or family has done a great job at saving money in pension plans, 401(k) plans, or businesses,” Jackson says.
Retiring at 62
“Retiring in your early 60s is ideal for many people,” says Wood. “You have allowed your savings to accumulate further and have received a few years of additional salary. In fact, the average retirement age in the US is 63.”
By age 62, you can access any money invested in IRAs, and you can begin drawing social security benefits, though at a reduced amount. According to the Social Security Administration, workers born after 1960 see their full benefits reduced by 30%. For some, depending on their investment accounts, that’s enough to justify saying goodbye to a day job.
Age 62 is also the age at which you can qualify for a reverse mortgage if you own your home. Taking a lump sum payout or monthly check is another way to help fund retirement.
Retiring at 65
At age 65, you become eligible for Medicare, the federal health insurance program, which can significantly reduce your healthcare liability. This is important since most employees lose healthcare coverage once they resign from their jobs, explains Wood.
Retiring at 67
An advantage of waiting until age 67 to retire is that retirees receive full benefits from social security. The difference in 2021 between retiring at 65 and at 67 is the difference between receiving $1,321 per month and $1,504, the Motley Fool reports.
Retiring at 70
“Some workers will decide it is in their best interest to retire late, such as at age 70,” Wood says. “Individuals may decide that this is their best option if they love what they do and are in good enough health to continue working.”
Those who wait until age 70 to retire to maximize their Social Security benefits have had a few more years to fund their retirement accounts through their earnings.
In the end, there is no perfect age to retire. There is only the age that is right for you.
“There is no single ‘best age’ to retire because it will be different for everyone, depending on their unique situation, needs, and goals,” says Drew Parker, creator of The Complete Retirement Planner, who advises that “you should retire based on assets, not age.”
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.