Everyone dreams of comfortable retirement life, yet many fail to prepare for it. Preparing for a good retirement life starts with figuring out your optimal retirement age and using it as a foundation in setting your retirement savings goal.
Anyone over the age of 65 is often automatically considered at their retirement age. While many people do retire at age 65, nearly just as many retire either earlier or later.
Determining retirement age isn’t always cut and dry. It depends on a variety of factors — particularly your financial stability and eligibility for retirement benefits. Knowing your optimal retirement age would help you ensure you are financially prepared when the time comes.
What is the Average Retirement Age in the U.S.?
You can technically retire any time you wish, as long as you have sufficient funds. This is why people retire at different ages, depending on their finances and circumstances.
Here in the U.S., people commonly retire at 62 years old.
According to a report from the U.S. Federal Reserve, half of their survey respondents reported retiring even before reaching 62 years. Meanwhile, nearly a quarter of the surveyed retirees said they retired between the ages of 62 and 64.
Many Americans choose to retire around the age of 62 since this is the earliest age you can start claiming your Social Security benefits. However, take note that receiving your Social Security benefits starting at 62 counts as claiming early. This means you can get up to 30% reduced monthly benefits due to not waiting for the full retirement age.
What is Full Retirement Age?
Full retirement age or normal retirement age refers to the age range you can receive full Social Security benefits. Eligibility for Social Security and other retirement benefits is a huge factor in calculating optimal retirement age. Most people wait until they can receive their full benefits to add to their retirement funds.
For many years, the full retirement age was 65. This started to change starting in 1983 after Congress passed a law to account for improved lifespan and health among retiree-age citizens.
Anyone born before and up to 1960 can use the Social Security Administration’s online retirement age calculator to figure out their full retirement age. Meanwhile, anyone born after 1960 will reach their full retirement age at 67.
Other Benefits and Factors to Consider
Aside from Social Security benefits, there are other retirement benefits that can influence you in determining your optimal retirement age. Here are three of them:
- Medicare benefits: You start to qualify for Medicare coverage at age 65.
- Roth IRA benefits: Roth individual retirement accounts generally allow distributions starting at 59 years and six months.
- Traditional IRA and 401(k) benefits: Similar to Roth IRA, you qualify for distributions starting at age 59 and six months.
How Much Should You Save for Retirement?
Financial and retirement experts largely recommend saving 10% to 15% of your monthly pre-taxed income. Others suggest setting savings milestones based on age and annual income, such as the following:
- By 30 years, your retirement savings should be equivalent to your annual salary
- By 50 years, your retirement savings should be six times your yearly income
- By 60 years, your retirement savings should be eight times your annual salary
- By 67 years or full retirement age, your savings should be ten times your yearly income
However, take note that there’s no one-size-fits-all answer when it comes to retirement savings. The ideal retirement savings would vary from person to person based on a variety of factors. These include:
- Your spending habits or current lifestyle
- Your sources of income
- Your preferred retirement lifestyle
- Your retirement age
- Your life expectancy
Take note that these factors are only those that you have a semblance of control over. You can manage your spending, savings, and health, but you can’t control external factors like inflation.
This is why it’s difficult to set your retirement savings goal in stone. It’s crucial to revisit your retirement needs and funds periodically. Make sure to adjust them as necessary to reflect any changes in your lifestyle, the economy, and more.
The Bottom Line
Figuring out how much to save for a comfortable retirement is much more difficult than figuring out your optimal retirement age. As helpful as the internet may be, it’s still best to learn from the experts when it comes to your money.
Enroll in our retirement savings course today and help your future self live the retirement life you deserve. Best of all, our courses are affordably priced, so you can learn how to be financially secure upon retirement without dipping into your hard-earned savings.