Retiring is a pretty big deal to say the least. One of the big questions that you may be asking yourself about retirement is: when should I retire? This question may not always be the easiest to answer, which is completely understandable because you want to make sure your golden years are full of relaxation and successful adventures.

The answer to the question depends on various different factors such as your personal needs, future/retirement plans, and of course your finances. As exciting and peaceful as retirement sounds, retiring at the right time for you is important. Leaving the workforce early may sound perfect, but it can come back to haunt you if you are not financially ready to retire. Of course you can always continue to work after retiring.

In order to help find your answer to the question of “when should I retire?” we have provided you some insight below on the pros and cons of retiring at different ages.

Before Age 65

Leaving your full-time job to live out your golden years before the traditional retirement age of 65 sounds just awesome and can have some great perks. According to the U.S. Census Bureau, the U.S. average age of retirement in 2019 was at the ripe age of 63. Retiring early will give you the opportunity to spend more time exploring the planet, focusing on your hobbies, or finding a part time job based around your at home hobbies or with less stress.

Some research has suggested that staying part of the workforce longer will keep you healthier and happier, but these findings are not conclusive.

A report done by the National Bureau of Economic Research in 2015 discovered that retirement can and does improve health and life happiness. In this report they also brought in the amount of people who are forced to retire because of issues with their health. 

However, retiring early does come with big cons.

Few people have the financial assets to support an early retirement. While you become eligible for Social Security at 62, you will not be eligible for your full monthly benefit amount until later in the future. For example, if you were born before 1955 you won’t receive your full benefits until you are 66. If you were born in or after 1955, it might be as late as 67 years of age until you receive your full benefits.

If you decide to start claiming your benefits at 62, you will get about 75% of the full amount and your spouse will only get 35% of your full retirement amount, versus the 50% they would get if you wait until 66.

If you retire early you will most likely need a large amount of money saved for the future or nest egg to support your Social Security funds. A rule of thumb is that you will need about 25 times your annual expenses, not including Social Security, to avoid outliving your money. The earlier you retire, the more you will need.

To add, you also will not be eligible for Medicare until you are 65 years of age. This heightens the chances that you will face big out-of-pocket expenses if you have to fund your own health insurance.

66 to 70 (Normal Retirement Ages)

The late 60s are often viewed as the gold standard for retiring. You have worked long enough to supply yourself with a pristine financial reserve and at the same time you are young enough to make your golden years golden and enjoy being job-free. You will also get your full Social Security benefits at 66 and this is a huge plus.

Being patient and waiting till at least age 66 will also give you extra time to build up your tax-advantaged investment accounts. Those who are investing at 50 years of age can use a “catch-up” provision to put an extra $6,000 every year into their 401(k) and another $1,000 every year into an IRA.

Back to Medicare, if you wait to retire until you are at least 65 you will be eligible for Medicare, which usually comes in at a fraction of the price of individual insurance plans for older adults.

70 and Older

If you have the type of job that you can’t believe you are getting paid to do and it truly makes you happy, then the advantages of retiring at 70 or older may be pretty apparent to you.

One advantage is that you will give yourself more time to increase your savings. Two, you will receive the highest possible Social Security Benefits payout, which increase on a prorated basis until the age of 70, when your benefits hit 132% of the full amount.

Furthermore, if you plan wisely and manage your finances you will have more money to do to the things that you have a love for and you will have fewer concerns about outliving your assets (Kurt, Investopedia).

When Should I Retire?

While it may seem that there may be an overall best age to retire at, when it comes to trying to figure out what age is best, you really need to focus on what is best for you and what is going to make you happy in the long run. Of course worrying about your finances every day after you retire isn’t an ideal way to spend your retirement days. If you feel that you can retire early and be happy then go for it. There are always ways to save and make more money once you are retired.

If want to make sure finances will be in good standing and you aren’t in a huge rush to retire, then wait till you are 66 or older.

Whichever you choose, just make sure that you take the time to think and research about your decision and make sure it is best for you and what you want out of life. As exciting as retirement sounds, retiring at the right time for you is important. You want to make sure you have the resources and financial stability to make your retirement years legendary.

If you should ever need some advice or some extra help when it comes to retiring don’t hesitate to reach out to Wildfire, we are ready to help when you need us.