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What Should Your Retirement Age Be?

When it comes to picking a date for life after work, timing is everything.

Written by Devon Delfino / February 28, 2022

Quick Bites

  • If you were born in or after 1960, the full retirement age for collecting Social Security is 67.
  • Pulling money from your retirement accounts ahead of schedule could trigger costly penalties.
  • Your anticipated retirement income and expenses should help shape your timeline.
  • You should also consider health insurance, your investment risk tolerance and how long you anticipate being retired to decide when to retire.

Coming up with your ideal retirement age can feel as baffling as the answers you get by turning over a Magic 8-Ball: Outlook good. My sources say no. Ask again later.

The traditional retirement age was once 65, the age you could start collecting Social Security benefits. But longer lives, shifting rules for when you can claim Social Security in full, and the need to fund a good portion of your own retirement have upended that tradition.

“Figuring out when to retire is a big stressor for a lot of people,” says Calli Case, a certified financial planner at Brooklyn Plans.

Here’s what you need to know to settle on a retirement age that suits your lifestyle—and your finances.

Inside this article

  1. The retirement age rules
  2. What age you can afford
  3. What else to consider

The retirement age rules

Your retirement schedule will depend in part on where you keep your retirement funds. Here’s a look at what the differences are for various types of accounts:

Tax-advantaged retirement accounts like a 401(k), traditional IRA or Roth IRA: You’ll be penalized for withdrawing any of that cash ahead of schedule. Generally, if you take money out of a 401(k) or IRA before age 59½, you will pay a 10% early withdrawal penalty.[1] (Though the IRS allows penalty-free early withdrawals for special circumstances such as in cases related to a disability, for medical expenses or for child support.) Based solely on those accounts, your retirement age should essentially be no earlier than 60.

Pensions: If you’re in line to collect a traditional pension, you may need to wait until a certain age to receive your maximum benefit. The average age is 62 but check your plan to be sure.

Social Security benefits: With Social Security, what’s called your full retirement age—the age at which you collect your entire promised benefit—has been shifting due to law changes to reflect longer lifespans. Now the full retirement age is 67 for anyone born in 1960 or later.[2]

You can start collecting at age 62, but your monthly benefit will be smaller if you go early. On the other hand, if you’re able to wait until age 70 to claim, your benefit will grow.

To give you an idea of what that might look like, here’s a breakdown of the penalties for claiming early versus the benefits of waiting for someone born in 1960 or later. This scenario assumes a full benefit of $1,600 a month for an individual.[3, 4]

AgeMonthly BenefitChange
62$1,120-30%
65$1,388-13.3%
67$1,600-
69$1,728+8%
70$1,856+16%

What retirement age you can afford

The decision of when to retire also comes down to when you can swing retirement based on how much you’ve saved. To estimate where you stand, look at these factors:

Your Expenses in Retirement

Knowing how much you’ll spend during your retired years can help you figure out how much you’ll need to save for retirement. You’ll have to factor in everything from how much you usually spend on groceries to whether or not you want to prioritize travel. It’s a question of lifestyle.

If you aren’t sure what you want retirement to look like, your current expenses are a good place to start, says Mike Powers, CPA, CFP and founder of Manuka Financial. That means whipping out a calculator—or using a budgeting app—to see where your money is going. Then use that information to shape your retirement goals. You might need to find opportunities to cut back and put more money into retirement savings. Or you might find you need to focus on increasing your income through a role change or promotion.

Tip: If you’re behind on retirement savings and you’re 50 or older, you can put an extra $6,500 into a workplace retirement plan like a 401(k) in 2022. For an IRA, the extra catch-up contribution is $1,000.[4]

Your Sources of Income

The amount you currently spend likely hinges on your income. But your retirement income won’t be the same. So you’ll have to try to estimate what you’ll have to spend in retirement.

Once you retire, your potential income sources include Social Security, a 401(k) or IRA, other investments, a pension and annuities. “There’s also potential part-time income or employment, whether that’s having your own consulting business or being a Walmart greeter,” says Powers. “That additional income can make a huge difference.”

What else you need to consider

There are a few other areas you’ll need to think about when setting a target retirement age.

Your Life Expectancy

It’s one thing to know how much money you’ll need to fund your life for a year. But how many years do you expect to need that money for? After all, saving for a 20-year retirement is quite different from planning for a 30-year one. It might feel morbid, but this is an important question to ask when planning for retirement.

Tip: Use a life expectancy calculator to get a glimpse at your potential retirement timeline.

Health Insurance

You may be getting health insurance through your employer now, but that won’t be the case when you retire. Once you reach age 65, you’re eligible for Medicare coverage from the federal government. But if your hoped-for retirement age is earlier than that, you need to plan for covering the cost of buying your own insurance. See what you might pay for a policy at HealthCare.gov. “If you’re able to control your income, then you can actually qualify for some pretty substantial premium tax credits,” adds Powers.

Investment Risks

Risk is an important factor when it comes to saving for a long-term goal like retirement, and you need to think about what you can tolerate as your retirement age approaches. Market volatility could put a dent in your savings. Inflation may decrease your spending power.

“For someone that’s really conservative and has everything in cash, you won’t earn as much as someone who has a well-diversified portfolio,” says Powers. And that rate of return compounds over time. So the younger you start saving for retirement, the better off you’ll likely be later on.

Your Attitude

If figuring out when to retire is stressful, ask yourself why. “It might be competing values that are really causing the stress,” says Case. “For example, if someone hated their job and wanted to retire early, but it wasn't feasible financially, that doesn't necessarily mean they have to continue on that same path.” Semi-retirement might be an option, or finding a job that’s more enjoyable.

Article Sources
  1. “Retirement Topics - Exceptions to Tax on Early Distributions,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions.
  2. “Retirement Benefits: Retirement Age Calculator,” Social Security Administration, https://www.ssa.gov/benefits/retirement/planner/ageincrease.html.
  3. “Retirement Benefits: How Your Social Security Benefit Is Reduced,” Social Security Administration, https://www.ssa.gov/benefits/retirement/planner/1960.html.
  4. “Delayed Retirement Credits,” Social Security Administration, https://www.ssa.gov/benefits/retirement/planner/delayret.html.
  5. “Retirement Topics - Catch-Up Contributions,” IRS, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions.

About the Authors

Devon Delfino

Devon Delfino

Devon Delfino is a writer who’s covered personal finance—including everything from student loans to budgeting to saving for retirement and beyond—for the past six years. Her financial reporting has appeared in publications like the L.A. Times, U.S. News and World Report, Teen Vogue, Masha

Full bio
Elaine King

Elaine King CFP®

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

Full bio

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