When asked what age do most people retire, the answer is often between the ages of 65 and 67. According to a poll conducted by Gallup, the typical age at which individuals decide to retire is 61.
Even if the lower actual retirement age may include some happy people who learned they had enough money to retire sooner than intended, the fact is that we don’t always get the opportunity to make that option for ourselves.
Some people are forced into retirement sooner than planned due to the loss of a career, health, or family circumstances.
Some people may be forced by their circumstances to retire earlier than they had intended. In contrast, others may discover that they must continue to work longer than anticipated because they need financial support.
Life comes with no guarantees, but if you’ve had a lot of success in your job and have consistently put money away for retirement, the answer to that question may be mainly up to you.
If you’ve had a lot of success, you could be able to retire in your 50s or even earlier than that if you’ve managed to save enough money.
To prevent having to pay an early withdrawal penalty on your 401(k) or IRA funds if you want to retire at such an early age, you need additional sources of retirement income in addition to those accounts.
As you draw closer to retirement, there are a few critical ages that you should keep in mind:
- Age 55: You are getting closer and closer to retirement, and there are a few significant ages that you should keep in mind as you approach them:
- Age 59½: As long as the qualifying plan or IRA allows, you can take money out of such accounts without being penalized by the IRS.
- Age 62: The age you become eligible to receive benefits from Social Security.
- Age 65: You become entitled to Medicare coverage.
- Ages 66–67: The age at which you are eligible to receive full retirement benefits from Social Security, based on when you were born.
- Age 70: The age at which one is eligible to begin receiving payments from Social Security.
- Age 72: You must start the required minimum distributions (RMDs) from your retirement accounts.
It’s important to develop a plan now, regardless of when you anticipate entering retirement.
A financial advisor may assist you in determining a target retirement age by analyzing your unique circumstances and working with you to achieve that age.
What is the Average Retirement Age?
According to recent surveys, the average age of retirement is 62. Most respondents indicated they intended to stop working at an average age of 64.
Although the reasons behind the early retirement of many Americans are “unclear,” factors such as unexpected job loss, health challenges, and conditions in the job market could all be contributors.
It is common for a person’s retirement savings, health benefits, and social security to determine the best time for them to stop working, and this decision can change with age.
Pension Plans and IRAs
If an individual is retiring before age 65, certain people, such as federal employees, are eligible to withdraw savings from their retirement plan at age 55.
At 59 ½, all employees can withdraw money from their qualified plans and IRAs without incurring a penalty from the Internal Revenue Service for early withdrawal.
People who put off retiring until later in life must take the required minimum distributions from their retirement plans at 72.
Especially if you decide to hang it up very early and retire before 65, there is a chance that you will need a sizable nest egg to supplement the funds you receive from Social Security.
The earlier you decide to retire, the higher your expenses will be.
Many workers had expressed the desire to retire at an older age than their predecessors did when they left the workforce.
Delaying retirement can provide several beneficial advantages, such as providing a few additional years to accumulate savings and allowing your investments additional time to expand.
If you wait to start collecting Social Security benefits until you are older, you will be eligible for larger monthly payments.
But you may not get to choose your retirement date. According to the findings of EBRI, even though the vast majority of retirees made a sudden transition into full retirement, many workers are hoping for a gradual transition into retirement.
How Will Your Age Affect Your Savings Income at Retirement?
No official percentage dictates whether or not your retirement savings in a 401(k) or another retirement plan will increase or decrease due to your age, in contrast to the case with Social Security.
There are, however, two primary aspects that will determine the rate at which your savings accumulate:
- Keep your current job for another year. You will be able to contribute an additional year’s worth of savings to your retirement plan and give your overall investment an additional year to generate a return.
- Each year that you put off withdrawing money from your retirement fund is one year that your savings won’t have to stretch as far to cover your retirement.
If you retire at 62, you will have a smaller total amount saved, but you will have to cover 28 years of your life if your plan assumes a potential lifespan of 90.
If you retire at 66, your accumulated savings need to finance 24 years of your life if your plan assumes a lifespan of 90.
The most effective strategy for achieving your monetary objectives is to focus on the future you envision for yourself and tune out anything (or anyone) that might serve as a distraction. And there’s no laughing matter about those diversions.
Talk to a financial consultant if you’re unsure that you’re on track to retire comfortably when the time comes.
They can help you to understand where you stand, how long your money will last, and what changes you need to make to ensure a secure and prosperous retirement for you in the future.