When Should You Retire?


July 1 2019

You love everything about being gainfully employed. But you’re getting close to retirement. What do you do? Should you wait until you’re 70? Retire at 62? Or continue working, but fewer hours, or maybe, in a different, less demanding position?

In this article, we will explore some of your choices. We will take a look at some of the available options that may fit your circumstances and lifestyle, while also considering the condition of your health during your later working years.

Retiring Early

Retiring at 62 (or younger) has an obvious allure. You no longer have to report to work. You’re no longer obligated to the confinements, time restrictions, and deadlines of a job.1

What are the benefits of retiring at 62? You’re generally healthier, and you may have more energy to pursue your retirement dreams. You can participate in exercise classes to keep your health on the up and up. You won’t be stuck behind a desk or in some sedentary position for large portions of your day. Suddenly, your weekdays are also open for scheduling. You may also decide to work part time.

Retiring at 62 gives you the obvious benefit of more free time. If you retire at 65 (or later), you’ll have at least three fewer years of free time to spend with grandchildren, traveling, or pursuing other activities.

The Social Security Administration mandates that the earliest you can start collecting benefits is 62. Once you start receiving benefits, the amount remains fixed. Early retirees (62) get 73.3% of their monthly full retirement allowance.2

Those collecting benefits at 62 would collect benefits for longer – 52 additional months, but while retiring at 62 may sound enticing, you’re not eligible for Medicare until you’re 65. So, you’ll be in good shape if you have health insurance. But if not, you’ll need to fill that financial gap with reliable coverage.2,3

Full retirement age – when you receive 100% of your benefits – varies depending on your birth year. Americans born in 1960 and later get full retirement-age benefits at 67.4

Can you afford to retire before you reach your full retirement age? How much money will you need to retire? Will you need $1.5 million to do it comfortably? Set numbers can be a bit misleading. A better formula might be to multiply your pre-retirement income by 70-80%. If your investments can generate that amount, go for the gold. If not, you may want to consider other options.5

Going for the Big 67

The average retirement age in the United States is 63, but waiting until you reach full retirement age means you’ll receive Medicare benefits and 100% of your Social Security benefits. Your full retirement age is 66 if you were born between 1943 and 1954. Full retirement age increases by two months every year for birthdays between 1955 and 1960.6,7,8

Retiring at your full retirement age (rather than waiting until you’re 70) provides you with merely the same health advantages as retiring young. Your health is reasonably good, and you can generally expect to live another two decades.

People who retire in their 60s are also allowed, but are not required, to tap into their 401(k) plans and Individual Retirement Accounts. The penalties for early withdrawals no longer apply after age 59½. Retirees, however, must take retirement account distributions after 70½. Many retirees with larger retirement accounts delay making withdrawals (or keep withdrawals at a minimum) to allow their accounts continued growth potential.9

Sliding Successfully into 70

Are you thinking of retiring at 70? Despite the perception that 70 is old, many septuagenarians are living active lives. For starters, you’ll get 135% of your Social Security benefits. The average monthly benefit is $1,461. If you wait until you’re 70 before you collect benefits, you’ll get $511.35 more per month, on average.10,11

If you haven’t collected any income from your retirement account, it’ll have 8 years of potential growth. For people between the ages of 65 and 74 who have a retirement account, the average account size is $358,000. At a conservative annual growth rate of 5%, the average account may grow to nearly $530,000. That’s more than $170,000 just for waiting. *12

Going for the Gold

Deciding when to retire depends on many factors, including age, health, finances, and vision of retirement. Some may decide to retire early because of poor health. Others may want to build their retirement savings and wait to retire later. In the end, your layout your priorities, paint your retirement vision, and proceed with gusto.



*This is a hypothetical example for illustrative purposes and not representative of any specific situation. Your results may vary.

1 https://money.usnews.com/money/blogs/on-retirement/2015/08/26/5-unexpected-benefits-of-retiring-early

2 https://www.ssa.gov/planners/retire/1956.html

3 https://www.cbo.gov/publication/44661

4 https://www.ssa.gov/planners/retire/retirechart.html

5 https://www.aarp.org/work/retirement-planning/info-2015/nest-egg-retirement amount.html#quest1

6 https://www.thebalance.com/average-retirement-age-in-the-united-states-2388864

7 https://www.ssa.gov/planners/retire/1943.html

8 https://www.ssa.gov/planners/retire/background.html

9 https://money.usnews.com/money/retirement/aging/articles/2017-05-30/the-new-target-retirement-age-66

10 https://www.fool.com/retirement/2017/01/09/4-reasons-why-70-is-the-best-age-to-retire.aspx

11 https://www.ssa.gov/planners/retire/1943-delay.html

12 https://www.thestreet.com/retirement/average-retirement-savings-14881067