Have you ever asked yourself questions about retirement? For example, “how old do I have to be to retire?” or “how much do I need to save before I retire?” or even simply, “when should I retire?”
If you’re a young adult, retirement probably seems so far off that you haven’t given it much, if any, though. If you’re a middle-aged or older adult, though, retirement is probably at the forefront of your mind more often than not.
There are many different factors that influence a person’s retirement age, and it can be hard to know at exactly what age you should plan on retiring.
If you’re in this position right now and don’t know when is a realistic age for you to retire, keep reading.
Listed below are some tips that will help you determine the best retirement age for you.
Average Retirement Age in the U.S.
There’s not one specific age at which everyone in the U.S. retires. Some people retire very early, while others continue working well into what is considered “retirement age.”
Most Americans are retiring when they reach their early-to-mid sixties.
About half of all retirees in 2017 chose to retire before the age of 62. Another 25 percent chose to retire between the ages of 62 and 64.
Among adults who are still working, the average anticipated age of retirement in the U.S. is 66. This is also the age that the Social Security Administration considers “full retirement age.”
When Should I Retire?
It’s good to know what the average American is doing when it comes to retirement, but your situation might be very different from the average Americans.
If you’re having a hard time calculating the appropriate retirement age, here are some things you ought to consider:
How Much Have You Saved?
The main thing that holds people back from retiring at a specific age is the amount of money (or lack thereof) that they have saved.
In order to determine the best age for you to retire, you need to take a good look at your finances.
Do you have enough saved to pay your bills and maintain your current quality of life? If not, how long will it take you to save that amount?
Estimate your total yearly expenses — including potential issues like emergency dental work or repairs to your home — then add up all the sources of income you’ll have in retirement — including social security benefits and your pension.
Be realistic when factoring the amount of money you’ll withdraw from your savings accounts and investment accounts, too.
Consider Your Medicare Eligibility
It’s not just income and expenses that you need to think about when you start preparing for retirement. You also need to factor in your Medicare eligibility.
In the United States, you become eligible for Medicare benefits when you turn 65.
If you want to retire before the age of 65 and you currently rely on an employer-sponsored healthcare program, you’ll need to make plans for a different type of healthcare coverage to fill in the gaps until you qualify for Medicare.
Be sure to factor the cost of health insurance into your total expenses to make sure you can afford it when you retire.
Think About Social Security
The amount of money you can collect in Social Security benefits may also influence your retirement age. Remember, the Social Security Administration considers 66 to the full retirement age.
However, you can begin collecting Social Security benefits at the age of 62. If you begin collecting then, you will only receive 73.3 percent of your monthly benefit. This is because you’ll be collecting benefits 52 months longer than the SSA planned.
If you begin collecting at age 65, you’ll receive 91.1 percent of the monthly benefit since you’ll be collecting them for an extra 16 months.
If you wait until age 66 to retire (or 67 if you were born in or after the year 1960), you’ll be able to collect full benefits.
Keep in mind, too, that if you delay your retirement until the age of 70, you can collect a larger monthly Social Security benefit. The trade-off, of course, is that you have to continue working longer.
What are Your Retirement Plans?
If you’re not sure what age you should retire, remember that there’s more to the equation than just saving money for everyday expenses.
What are you planning to do during your retirement? Do you have plans to travel? Downsize to a smaller home?
These plans will influence the amount of money you need to save and, in turn, the number of years you’ll need to continue working in order to save that money.
If you have a decent amount of money saved and are comfortable with the idea of a modest retirement, you may be able to retire earlier than someone who has grand plans but not a lot of money in the bank.
Tips for Saving for Retirement
Clearly, the amount of money you have saved plays a significant role when it comes to determining your retirement age.
Do you need help making sure you have enough saved for retirement? Here are some tips to follow:
- Take full advantage of your employer’s 401(k) match
- Open an Individual Retirement Account (IRA) to start saving more money tax-free
- If you’re over 50, take advantage of catch-up contributions
- Look for ways to reduce your spending and put more in savings
Don’t be afraid to work with a professional, either. A financial advisor can be very helpful.
This is especially true if you’re first getting started with the retirement planning process and need help figuring out how much to save and when you can realistically retire.
Start Planning for Retirement Today
As you can see, there’s not one simple answer to the question, “when should I retire?”
There are a lot of factors you need to take into account before you can figure out the most appropriate retirement age for you. If you keep this information in mind, though, the process will be much simpler.
Do you need more help planning for retirement, though? If so, we’re here to help at Navigation Wealth Management.
Contact us today to learn more about our services or to schedule an appointment to meet with one of our advisors.
We’ll help you get a handle on your finances and make sure you’re ready to retire when the time comes.