Retirement is one of those life milestones that many Americans look forward to. However, the age at which it’s possible to comfortably retire will vary based upon the situation an individual or family finds themselves in. While there is no one-size-fits-all retirement age, there is an age that is common for the typical American to retire.
When Can You Retire?
Some people retire really early. There is a rule for early retirement known as the 4% Rule. This rule states that as soon as your annual expenses equal 4% of your retirement nest egg, you can retire. This can play out well, and you could die with a bigger nest egg than you started with. The sequence of returns tends to affect how well this plan works out in the long run. If you get relatively good returns on your investments in the first handful of years after you retire, you should be able to live without many financial worries until you ultimately die.
On the other hand, low returns early in retirement will mean that your 4% in year one will drop the next year. This situation can lead to lower overall returns over the long run because any years with solid returns will start from a lower base. Some people in recent years have used the 4% rule to retire around age 30. Others have been able to retire in their 30s or 40s. These folks are the extreme outliers. Few people are able to achieve what they’ve done. Traditionally, most people have defined early retirement as retirement between the ages of 50 and 60. However, this is not the typical retirement age.
When Do Most Americans Retire?
When looking into the average age at retirement, the typical American male retires at age 64. The average American female tends to retire at 62. This is the “typical” retirement age in the US in terms of the average age at retirement, but it is no means set in stone. People choose to retire at different ages for different reasons. Even those who retire extremely early tend to work on passion projects while semi-retired. This is far from the stereotypical retirement of lounging around on the beach or hitting the golf course every day for 20 years.
Some people keep working longer than they need to because they simply love their jobs. If an employee doesn’t need the job that he or she has, yet their employers find them beneficial to the overall performance of the company, it’s sometimes possible for valuable employees to negotiate improved working conditions. Some productive workers are able to negotiate three- or four-day work weeks. Others are able to squeeze summer sabbaticals out of their employers. If you like your job, and you’re able to negotiate a good salary and favorable working conditions from your employer, there’s no need to quit as soon as possible.
When Can You Apply For Social Security?
Many people wait until they can apply to receive Social Security benefits before taking the plunge into retirement. It’s possible to start receiving Social Security payments at age 62. Therefore, it should come as no surprise that the average retirement age falls right around this age. It can be tempting to apply as soon as possible, but the government has a few stipulations that can make it beneficial to wait.
Those taking benefits at age 62 technically apply for early benefits. A person’s full retirement age varies based upon when they were born. Those born before 1943 received full benefits at age 65; those born between 1943 and 1954 had to wait until 66. Today, most future beneficiaries will have to wait until age 67 to file for full benefits. This change in the full retirement age had the intent of ensuring the solvency of Social Security into the future, and it did.
Those looking to claim their benefits at age 62 need to remember that there is a reduction of as much as 30% off of their full retirement benefit. Additionally, the government wants people to wait even longer. Those who wait until 70 to start drawing Social Security checks will realize even more than their “full” Social Security benefit. The average Social Security benefit is a little more than $1,500 a month. This means that a 30% reduction for taking the benefits early would drop that to a little less than $1,100 per month.
Some people retire earlier than the average. Some do so for health reasons, and those who do will likely start drawing Social Security as early as possible. Others who retire early do so because they no longer need to work to bring in income to support their lifestyles. These are the fortunate early retirees.
Still other people will work as long as they can. Frequently, these people have saved little outside of Social Security to support them in old age. Those in the middle of the two extremes tend to retire between 62 and 64, and this age corresponds very closely to the earliest they can draw on their Social Security. While they’ll take a hit every month for filing as early as possible, it tends to show that the average person is ready to leave the workforce when they can apply to draw their Social Security checks.