Should you retire at 60? 62? 65? 70? It’s a tough decision.
A recent survey from Boston College’s Center for Retirement Research found that the average retirement age is now 62 for women and 64 for men. That has some interesting implications, and it can have each of us pondering our own retirement date.
To put those numbers in perspective a bit, know that the average retirement age for Americans overall has been stabilizing in recent years. It had been inching up over decades, because of factors such as the death of the corporate pension, the increased “full” Social Security retirement age for some, increases in overall health and longevity, and a shift away from manufacturing jobs, which can wear out a body faster. According to Gallup data, the average retirement age in 2002 was 59.
Interestingly, even though the average retirement age has increased over the past few decades, to most people, retiring at 62 or 64 seems a bit early. After all, that’s earlier than the earliest possible full retirement age for Social Security — that’s 65 for those born in 1937 or earlier (and 67 for those born in 1960 or later, and somewhere in between for those born between 1937 and 1960).
Should you retire at 62 or 64, too?
If so many people are retiring around age 62 to 64, should you do so, too? Do they know something you don’t? Well, the best retirement age for you is … it depends. There’s really no one-size-fits-all best retirement age. Here are some reasons you might want to retire early or late, followed by some suggestions.
There are pros and cons to retiring early or late. (Photo: Julia Manzerova, Flickr.)
Why retire early?
The most obvious reason to retire early is to enjoy more years of not having a full-time job. If you have a sufficient nest egg, retiring early can be a reasonable financial move, too, Social-Security-wise. That’s because although you’ll receive smaller monthly checks if you retire before your “full” retirement age, you’ll receive a lot more of them than you would if you retired on time or late. Another plus for retiring early is that despite actuarial tables, exactly how long we’ll live remains a mystery — and it would be a shame to end up with far fewer retirement years than you expected.
Why retire later?
Many people retire later simply because they have to, but others choose a late date because they want to beef up their finances more or perhaps because they’re afraid they’ll be bored in retirement. By working longer, you can save more of your income, and you can give all your retirement accounts more time to grow before you start tapping them. You may also be able to remain covered by your employer’s health insurance, saving more money. (The folks at Fidelity have estimated that a 65-year-old couple will spend, on average, more than $200,000 on health care during their retirement.) Better still, if you don’t start receiving Social Security benefits at your full retirement age, your monthly checks will increase by about 8% for each year you delay until age 70.
Keep in mind …
Clearly, there are many factors involved in the when-should-I-retire decision. As you deliberate, the most important question to ask yourself is, “Am I financially ready to retire?” It’s not smart to quit working early if you don’t have enough expected income in retirement to carry you through it — and through more of it if you retire early. Estimate your expected nest-egg size at retirement, your anticipated income streams in retirement (Social Security, income from IRAs and 401(k)s, dividend income, and so on) and your expected living and enjoyment expenses. Then crunch the numbers to see when retiring makes sense. (Think hard about your expenses, so that you don’t forget any significant ones. Many retirees, for example, spend a lot supporting their children. If you will, too, factor that in.)
It can be worth spending some money on a financial advisor, too, to get a professional opinion on the state of your finances, some suggested actions, and assurance that your ducks are or will soon be in a row.
Finally, remember that many people don’t get to retire at the age they choose. A job loss or health setback may push you out of the workforce before you’re ready. You can defend against being financially hurt by that by saving aggressively and investing effectively for retirement. If you end up with a little more than you need, that’s not the worst problem to have.
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