When to Retire (And Why Age Matters)

When to retire you ask?

It really depends on your own needs and situation. Research from the National Bureau of Economic Research tells us that retiring can make you healthier and happier, but the age you choose to retire at can affect how good your retirement will be.

The age you retire at can have a big impact on your money. Think about what age works best for your financial situation so you can have a comfortable retirement.

Key Points to Remember:

  • Social Security rules say 65 is a common age to retire.
  • On average, men retire around 64.6 years old, and women usually work until about 62.3 years old.
  • If you retire at 65, you can get Medicare benefits.
  • Depending on when you were born, waiting to get Social Security until you’re 70 can make your monthly payment 32% bigger compared to taking it at your full retirement age.
  • Congress changed the age when you must start taking money out of some retirement accounts in a law called SECURE 2.0. Now, it’s 73 years old.

➤ When to Retire: Before 65

As people hit their 50s and early 60s, they often start thinking about retiring. On average, men retire at around 64.6 years, and women tend to keep working until they’re about 62.3 years old.

In the past, the rule for Social Security was that you could get full retirement benefits at age 65. But things have changed. In 2023, the full retirement age for Social Security is 66 if you were born between 1943 and 1959, and it’s 67 if you were born in 1960 or later.

When you decide to retire can depend on a few things, like your savings, health benefits, and Social Security. These factors change as you get older.

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Pension Plans and IRAs

If you want to retire before you’re 65, some folks, like federal employees, can start using their retirement savings at 55. For most folks, at age 59½, you can take money from your retirement plans and IRAs without getting hit by an IRS penalty for taking it out early.

But if you decide to work a bit longer, you’ll eventually have to start taking money out of your retirement plans. It used to be you had to start at 72, but Congress moved it to 73 as part of a law called SECURE 2.0.

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Usually, if you want to retire early, you’ll need more money saved up, especially if you’re retiring before 65. The earlier you retire, the more money you’ll need.

For example, Fidelity Investments suggests that if you retire at 65, you should have about 12 times your salary saved and plan to take out about 4.2% of it each year.

Social Security

If you retire at 65 or earlier and start getting Social Security, you’ll only get 75% of the full amount. If you have a spouse, their benefit will also be 30% less than the full amount.

But if you wait until 66 or 67, you can get the full Social Security amount, depending on your birth year. The latest you can start getting Social Security is at age 70.

If you retire at 65 or earlier and get Social Security, you can also keep working and make money at the same time. But if you earn more than a certain amount each year, your Social Security benefits might be reduced.

Medicare and Health Benefits

Retiring at 65 means you can sign up for Medicare, which helps with healthcare costs. If you retire earlier, you’ll need to budget for health insurance.

In 2022, the average cost of health insurance under the Affordable Care Act was about $585 a month. But in 2023, standard Medicare Part B insurance costs $164.90 a month with a low deductible of $226 per year. These are lower costs compared to 2022.

To stay protected, you might also want prescription drug coverage (Medicare Part D) or Medigap—or even Medicare Advantage. Prescription drug coverage premiums average $31.50 a month in 2023, and Medicare Advantage premiums are about $18 a month.

Medigap is private insurance that helps with Medicare and prescription drug costs. If you don’t sign up for prescription drug coverage when you retire at 65 and later decide you want it, you might pay a higher cost for the rest of your life—unless you have employer drug coverage.

Most financial experts suggest your retirement income should be about 80% of what you earned before retiring.

➤ When to Retire: After 65

For many folks, the late 60s can be a great time to retire. You’re old enough to have saved up some money, and you’re still young enough to enjoy your retirement.

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If you can wait until you’re 66 to 67, you’ll get your full Social Security payment, which can be a big deal, especially if you’re healthy and expect a longer retirement.

Waiting a bit also lets you boost your tax-advantaged savings. If you’re over 50, you can put more money into your 401(k) or IRA each year.

In 2023, if you’re 50 or older, you can put in $7,500 into a traditional or Roth IRA, which is more than the $7,000 limit in 2022. If you use a 401(k) for retirement, you can put away up to $30,000 of your salary in 2022 after you turn 50.

Plus, if you wait until 65, you can join Medicare, which is usually cheaper than regular health insurance for older adults.

Just remember, the age when you can get your full Social Security payment is now 67 if you were born in 1960 or later.

➤ When to Retire: After 70

If you really enjoy your job, working into your 70s can be a good thing. But for most folks, the idea of working for even longer might not sound appealing.

However, there are some benefits to consider. First, you’ll have more time to save money, which is always a good thing. Plus, you can get the highest possible Social Security payment if you wait until you’re 70.

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The increase in benefits is gradual, but if you were born between 1943 and 1954, your benefit can go up to 132% of the full amount at 70. If you were born in 1960 or later, it can increase by 124%.

So, if you plan carefully, you can have more money to do the things you love and worry less about running out of money in retirement. If you stay healthy, you can have many years to enjoy your retirement.

Of course, not everyone can choose to retire later. Sometimes life circumstances, like unexpected events, can affect your retirement plans.

For example, research from Northwestern Mutual in 2021 found that the economic impact of the COVID-19 pandemic has led many Americans to delay their retirement. About 24% of them now plan to retire later than they originally thought.

When to Retire: FAQ

When Is Early Retirement?

Retiring before the usual age of 65 is generally called early retirement.

You can start getting Social Security retirement benefits at 62, but you won’t get the full amount. For folks born between 1943 and 1954, full benefits don’t kick in until you’re 66, and for those born after that, it’s a bit older.

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What Age Do You Need to Be to Retire?

The age you need to be to collect your full Social Security benefits is 66 years and two months if you were born in 1955. It gradually goes up to 67 for those born in 1960 or later.

How old you should be to retire comfortably depends on your lifestyle and how much money you’ve saved. If you retire early, you’ll need a bigger nest egg.

What’s the Average Retirement Age in the U.S.?

The average retirement age varies for women and men. On average, women retire around 62.3 years old, and men usually retire at about 64.6 years old.

When to Retire: Final thoughts

A lot of folks can’t wait for the day they retire, but worrying about money during your later years isn’t ideal.

So, instead of just thinking about the age when you can start getting retirement benefits, it’s crucial to think about when it makes sense for you to retire.

Before you make that decision, be sure you have enough money to enjoy this new phase of life to the fullest.

Important things to remember
– Retirement age impacts the quality of your retirement.
– Consider your financial situation when choosing your retirement age.
– Full Social Security benefits start at different ages.
– Early retirement can affect Social Security and health insurance.
– Delayed retirement can boost Social Security and savings.
– Working longer can provide financial security in retirement.
– Assess your resources before making a retirement decision.
  1. National Bureau of Economic Research – Retirement and Health
  2. Center for Retirement Research at Boston College – Retirement Ages by Education
  3. U.S. Centers for Medicare & Medicaid Services – Medicare Program
  4. Social Security Administration – Full Retirement Age
  5. Consolidated Appropriations Act of 2023
  6. Social Security Administration – Retirement Age Calculator
  7. Social Security Administration – Starting Your Retirement Benefits Early
  8. Internal Revenue Service – Exceptions to Tax on Early Distributions
  9. Internal Revenue Service – Required Minimum Distributions (RMDs)
  10. Fidelity Investments – 4 Rules for Retirement Savings
  11. Social Security Administration – Receiving Benefits While Working
  12. U.S. Centers for Medicare & Medicaid Services – 2022 Medicare Parts A & B Premiums and Deductibles
  13. U.S. Centers for Medicare & Medicaid Services – 2023 Medicare Parts A & B Premiums and Deductibles
  14. U.S. Centers for Medicare & Medicaid Services – 2023 Projected Medicare Basic Part D Average Premium
  15. U.S. Centers for Medicare & Medicaid Services – Lower Premiums for Medicare Advantage and Prescription Drug Plans in 2023
  16. U.S. Centers for Medicare and Medicaid Services – What’s Medicare Supplement Insurance (Medigap)?
  17. Fidelity Investments – How Much Will You Spend in Retirement?
  18. Internal Revenue Services – IRA Contribution Limits
  19. Internal Revenue Service – 401(k) Plans – Deferrals and Matching When Compensation Exceeds the Annual Limit
  20. Social Security Administration – Full Retirement Age for Those Born in 1960
  21. Northwestern Mutual – 2021 Planning & Progress Study
Pavlos Written by:

Hey — It’s Pavlos. Just another human sharing my thoughts on all things money. Nothing more, nothing less.