The Ideal Retirement Age To Minimize Regret And Maximize Happiness
Updated: by Financial Samurai
Contrary to popular belief, the ideal retirement age isnt as soon as possible. Retire too soon and you may feel empty for never living up to your true work potential. Retire too late and you might always be left wondering what could have been if you had changed course sooner.
For example, a 35-year-old couple making $400,000 might love their jobs. With two young kids under three, both parents might both want to work for 20 more years. This way, they can maximize their capital and support their kids through college.
Then you might have a 30-year old couple making a combined $200,000. They dont have kids and dont want kids. Instead of needing a 4-bedroom, 3-bathroom home, they are happy living in a 1-bedroom condo for much less. All they want to do is travel and lead a simple life. In their mind, the ideal retirement age is 40.
To minimize regret and maximize happiness, I believe the ideal retirement age range is between 41-45. For reference, I retired from banking in 2012 at age 34 and unretired by 36 because it was just too boring. Im currently 45 years old and have accomplished everything Ive wanted to accomplish, including publishing a Wall Street Journal bestselling book in 2022 entitled, Buy This, Not That.
Lets go through the reasons why 41-45 is the ideal age range to retire.
Health Care Is Expensive
Medicare, the federal program that provides health coverage for more than 61 million older Americans, doesn’t start until age 65. Until then, you’ll need an alternative and it won’t come cheap.
“Private health insurance before Medicare kicks in costs an arm and a leg, says Brian Schmehil, director of wealth management for the Mather Group in Chicago. Current law says your insurance costs can’t be more than 8.3 percent of your household income. For a person with a household income of $50,000, for example, a mid-level silver plan would be $346 a month, or $4,150 per year.
What’s Full Retirement Age
Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: For anyone born in 1960 or later, full retirement age is 67. For those born in 1955 through to the end of 1959 , full retirement age ranges between 66 and 2 months and 66 and 10 months. If you were born before 1955, you’ve already reached age 66 and full retirement age.
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Holding Out As Long As Possible Isn’t Always Your Best Bet
Social Security isn’t something everyone is entitled to automatically. To qualify for benefits during retirement, you need to work and pay taxes on your income .
It’s for this reason that so many seniors are invested in getting the most out of Social Security, and understandably so. And you’ll often hear that the best way to maximize your benefits is to delay your filing until age 70.
You’re entitled to your full monthly Social Security benefit based on your personal earnings history once you reach full retirement age, or FRA, which hinges on your year of birth. It’s either 66, 67, or 66 and a specific number of months.
Image source: Getty Images.
For each month you delay your Social Security filing past FRA, your benefits get a small boost. Hold off for a year past FRA, and you’re looking at an 8% increase.
This incentive only applies until 70. At that point, you can’t grow your benefits any more, which is why 70 is considered the latest age to sign up for Social Security .
If you’re looking at an FRA of 67, claiming Social Security at age 70 could mean locking in a monthly benefit that’s 24% higher than what it would’ve been at FRA. And that boost remains in effect for the rest of your life.
As such, filing at 70 might sound appealing. But it won’t necessarily be your best move, financially speaking. In fact, if one circumstance applies to you, then you’re much better off claiming your benefits well before your 70th birthday.
How Much Money Should You Have In Savings At Retirement
At a minimum, you should aim to have enough money to cover 75% of your current monthly expenses. This will help ensure you can maintain your current lifestyle even after you stop working.
Use our annuity calculator to estimate how much your retirement savings will generate in retirement income. Then combine your Social Security Benefits with the annuitys lifetime income, and determine whether the monthly amount equates to 75% or more of your current monthly income.
If the combined monthly income is lower than 75% of your current monthly income, consider buying the annuity now, letting it accumulate, and retiring at an older age.
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Retiring Between Ages 31 35
Most people only start gaining confidence at work after theyve hit 30. Before then, youre mostly a cost center doing your best to learn everything you can about the business. Why else do you think there are no CEOs under 30, except for at startups that have failure rates of over 90%?
Your 30s is a time to leverage all the experience youve gained in your 20s to position yourself for greater rewards. Unless you have something very clearly in mind that you want to do in retirement, to retire before the age of 35 is to prematurely truncate your potential.
Even though I retired at 34, I believe 34 is too young. I went through seven years of post-high school education, three of which were done part-time for my MBA. As a result, I feel like I didnt fully maximize my MBA. Further, it would have been nice to have a kid while working to take advantage of benefits.
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The Best Age To Retire: When You Can Collect 100% Of Social Security Benefits
The best age to retire for most would be the age at which you can collect full Social Security benefits, which the Social Security Administration calls full retirement age. However, this Social Security benefits age isnt a fixed number, depending instead on your birthdate. The Social Security Administration lists full retirement age as between 66 and 67, depending on your birthdate. The Social Security Administration lists full retirement age as between 66 and 67, depending on your birthdate. Furthermore, you can also begin collecting benefits at age 62, although doing so means receiving less benefits than if you started collecting them at your full retirement age.
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Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
Reason #: Retire At 62 If You Know What Else You Want To Do
Do you have a dream that youve always wanted to pursue, but never had the time? Maybe you want to write a novel. Have you toyed with the idea of joining the community theater? Or perhaps youve always wanted to grow your own food on a farm. Maybe you want to raise sheep, harvest the wool, and open a yarn shop.
If you have a real goal and you know youre passionate about it, youve got a good if not GREAT reason to retire early.
They say that no one ever reached very old age regretting the things that they did. Whats regretted are the things not tried, the chances not taken, the dreams left dusty and neglected on a shelf. If you are able, retiring at 62 can give you many years to seek out that dream and really enjoy it.
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What If I Change My Mind
If you receive Social Security benefits at a reduced rate but then change your mind, you have the option of withdrawing your application within the first 12 months of receiving benefits and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. Be aware that you’re limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62 but then decided to go back to work at age 63. You could withdraw your Social Security application, pay back the years’ worth of benefits you received, go back to work, and then wait until your full retirement age to restart your benefit checks at a higher level.
Once you reach full retirement age, another option is to voluntarily stop benefits at any point before age 70 to receive delayed retirement credits . Benefits will automatically restart at age 70 at a higher amountâunless you choose to start taking benefits before then. Note that when you withdraw your application or stop your benefits after full retirement age, you must specify if your Medicare coverageâif you have itâshould be included in the withdrawal.
Have You Saved Up Any Cash Reserves
Some financial advisors recommend saving enough money in a liquid cash account to cover the first few years of living expenses after you retire. Then you wont have to tap into your retirement accounts if the market is down at the time when you begin your retirement.
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However, if you dont have any cash savings and will need to start withdrawing money from your retirement account as soon as you retire, you may consider retiring either very early or very late in the year. This could allow you to avoid making retirement account withdrawals in a year when you might have earned income that would push you into a higher tax bracket.
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Retiring Between Ages 51 60
Perhaps youve waited this long because you wanted your kids to get through college. Or maybe you just couldnt quit the money and the prestige granted upon you after 30+ years of work. Or maybe you are lucky enough to have a nice pension waiting for you.
Whatever the case may be, you better have loved what you did or else you will feel regret having waited until 60 to retire.
After more than 30 years of saving and investing, you should feel financially secure to do whatever you want. If youve stayed in good shape, you may feel like now is the time to live it up.
How To Know Its Time To Retire
a long working life, many people simply feel like leaving everything and enjoy life. However, desires are one thing, and reality is quite another. So, people often ask the question of how to decide when to retire?
Keeping in mind that this feeling is widespread, you can use several guidelines to assist you in making this decision. Among these guidelines, several stand out:
- You are tired of working
- You are free of debts
- You no longer have to take care of your kids
- You are financially secure
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There’s A Lot Of Time To Kill
When you retire, you have a 40-hour gap in your week that you need to fill. Are you sure you have enough activities to keep your body, mind and spirituality occupied for the many years you have ahead of you? asks Catherine Valega, a certified financial planner in Winchester, Massachusetts.
How much time do you realistically see yourself spending going on long walks, lounging poolside or curling up on the couch with a good book, especially after the novelty wears off? Think hard and think long term before you retire. Do you want to volunteer? Go back to school? Pick up a new hobby or resume an old one? Come up with a plan in advance of retirement.
Will Full Retirement Age Change Again
Though the last legislative change to full retirement age was in 1983, Carroll warns that a future increase in full retirement age is a likely component of a comprehensive Social Security reform package. The culprit for this likely change is our increasing longevity.
More people are living long enough to claim Social Security than in the past, and theyre then spending more years receiving benefits. This makes the program significantly more expensive today than when it was founded, Carroll says. To keep Social Security solvent and provide the same level of benefits, the bar to receive Social Security either needs to rise, taxes have to increase or both.
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Average Retirement Age Trends
In terms of retirement age trends, women are working longer. Men are also starting to work longer again. Take a look at the chart below.
The trend to work longer for men since the early 1990s is probably due to changes in Social Security, pension eligibility, less strenuous work, longer and healthier lives, more educational requirements, and a decline of retiree health insurance.
The constant increase in retirement age for women is likely due to increasing workforce participation plus all the same reasons men face. In a land of equality, I suspect the average retirement ages will eventually converge at around age 65.
Now lets look at factors involved in deciding the ideal retirement age. In my mind, the two biggest factors are life expectancy and overall health.
Pros And Cons Of Retiring At A Normal Age
Again, for Social Security purposes normal retirement age means anywhere from 65 to 67, depending on the year you were born. If youre considering this as the best age to retire, there are some advantages. For instance, the longer youre working the more time you have to contribute to a 401 plan and receiving a matching contribution if your employer offers one. You also have more time to earn income and contribute to a traditional IRA or Roth IRA to supplement your workplace plan.
Waiting until your normal retirement age means that your Social Security benefits arent reduced. You can stay covered by your employers health insurance as long as youre working, then apply for Medicare at age 65.
The trade-off, of course, is that you might end up working longer than you want to or delaying your dream retirement lifestyle. And its always possible that you may be forced into retirement early anyway if you experience an illness or disability that keeps you from working or your company downsizes and eliminates your position.
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What Are The Advantages Of Retiring Younger
The biggest advantage of retiring younger is the increased time you will have to spend as a retired man or woman. Retiring early will give you more time to spend with your grandchildren and children, while you are still fit and healthy enough to do so. Being retired affords you lots of free time. But that’s no good if you are too old and tired to do much with it. Realistically, this isn’t a major problem. But the difference between the early 60s and late 60s fitness-wise is night and day. If you want to go hiking with your family, early retirement might be the way to go. Retiring early also gives you the chance to make money in other ways. Retiring and cashing in on your pension might allow you to enter new ventures. As a business investor, buying and selling real estate, or blowing your money down the track. The choice is yours. Most people don’t have the time or financial freedom to do these things while working nine to five.
Average Retirement Age By Race
White Americans tend to have more assets at retirement than Black or Hispanic Americans.
Just 35% of Hispanic families and 41% of Black families have savings in a 401 or IRA account, according to the Economic Policy Institute .
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Despite the lack of savings, minority groups are more likely to retire at earlier ages.
While the Federal Reserve research above didnt identify average retirement ages by race, it did report that 56% of Black people and 65% of Hispanic people retired at the age of 61 or earlier, compared to less than half of white retirees.
Common reasons for the earlier retirement age were health problems, having to care for family members and lack of available work.
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What Is The Best Age To Retire Let Us Guide You Through It
Retirement is a big decision, and when to retire is different for everyone. You can start to receive certain retirement benefits once you reach your 62nd birthday. Delaying your retirement, however, will cause those benefits to increase over time.
On average, men typically retire at 64, while women usually retire around 62. And what do you do once you officially retire? Anything you wish, whether that means traveling, learning new skills or hobbies, spending time with loved ones, volunteering, etc. Itâs all up to you. Based on information gathered by the National Bureau of Economic Research, research shows retiring improves oneâs overall health and quality of life.
There are advantages and disadvantages to retiring at certain ages. Read on as we examine them in greater detail.
