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65 isn’t right for everyone.

By Kristine Gill
April 01, 2021
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How to pick the right retirement age for you - candles on cake
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Most people have a magic number in their heads when considering retirement. Maybe you're on a fast track to lock in your pension and retire by age 55. Or perhaps you're hoping to retire when you have grandkids, whenever that might be. Perhaps you're not interested in retiring yet and hope to work well into your 60s and 70s.

All of those ages can work, as long as you've done the research to make sure they're a fit for your current savings and investments. Experts say that choosing the right age for retirement requires that your diverse retirement portfolio aligns with the realities of certain assets, such as Social Security and Medicare. Choosing the right age then depends on factoring all of these things into your own personal situation.

Estimate your lifespan

It’s morbid, but retirement planning comes down to your lifespan. That’s why all of your plans should take this reality into account first and foremost.

Terry Savage, a nationally syndicated financial columnist and author of The Savage Truth on Money, suggests taking an online quiz to begin. She was surprised to learn that a quiz estimated her lifespan through her 90s. If you’ve been budgeting with the idea that you will need 15 to 20 years of spending money, you might have to think again.

“It used to be a pension would take care of you, but today if you retire at 65 you may live 30 more years,” says Steve Bogner, managing director at a New York City–based wealth management firm. “That’s a much longer time period that you have to be able to prepare for.”

Also consider the fact that the money you’re saving now will lose value with inflation over that 30-year period. That means your savings goals need to reflect those changes.

Look at the rules

Unfortunately, you can’t decide to retire at any age and expect certain pots of money to become available to you. Choosing the right age means making sure these timelines align so you can cash in without penalties.

“You should retire at the age when you have enough income and assets to maintain your lifestyle until you and your partner pass away,” says Shelly-Ann Eweka, director of financial planning strategy at financial services company TIAA.

So, keep these key ages in mind.

The magic number for taking 401(k) distributions without penalties is 59 1/2. You can start getting social security benefits at 62, but if you wait until age 67, your payments will be larger. Most pensions kick in by age 65, but others will allow you to start early, at 55. Medicare is also generally available beginning at age 65.

As you prepare to retire, see how these ages line up. If you want to retire before all of these benefits are available to you, that’s still an option—you’ll just have to do some extra leg work to ensure your personal funds can bridge any gaps in coverage.

Ask yourself: “‘How much social security do I have? How much income do I need? What about pensions?’” Ewekwa says. “Then, ‘how much assets do I have, and will that give me that guaranteed income plus enough withdraw money to last until I pass away?’”

In many ways, budgeting to cover these costs can feel like a guessing game. Save up too much and your excess funds will likely benefit your heirs. But save too little and you could be placing a burden on those same beneficiaries.

“Some people can afford to retire at 59 but want to work until 70, and that’s fine. The point is you ran the numbers,” Eweka says. “Try not to stop working before the age when you can maintain that lifestyle you want.”

Fidelity retirement income calculator screenshot
Credit: Fidelity Brokerage Services

Consider your particular finances

Unfortunately, there’s not some round number everyone can aim for to ensure a smooth retirement. Your particular needs will vary widely from your neighbors’ or your relatives’.

One way to stay on top of things is to get a pulse on your retirement annually. Bogner suggests using free online tools to predict your investments’ futures based on current circumstances.

“It’s very important to do a forensic analysis on your retirement situation at least yearly,” he says. “Just plug in the numbers and use the models and try to figure out what’s really the right solution for you.”

Your circumstances will vary widely based on where you choose to retire and whether you’re putting kids through college or planning to buy a vacation home or downsize, for example, and whether you’ll get medical benefits through something like Veteran’s Affairs.

“Everybody's scenario is going to be unique to them,” Bogner says.

For more personalized attention, work with a financial planner to make sure you have a clear picture of your entire financial situation.

“The right age is when you can afford it,” Eweka says.

Make a decision that will allow for a comfortable lifestyle

Bogner says choosing the right retirement age comes down to planning for the lifestyle you want to lead.

“Retirement planning is all about income replacement ratios. If I make $100,000 now and I want $70,000 [per year] in retirement, I need to be saving 10 to 15 percent today of my current pay,” he says. “We have to figure out your targeted percentage you’d like in retirement and we kind of back into what you need to start saving today.”

Of course, it’s best to begin planning for retirement in your 20s and 30s, Bogner says, to allow your investments to compound over time and to cushion yourself against any downturns in the market. If you haven’t planned for retirement or haven’t been saving enough, you might not reach your retirement savings targets.

This is where easing into retirement might be an option for you. Annette Hammortree, owner of Hammortree Financial Services in Crystal Lake, Ill., calls it staging your way into retirement. Many of her clients opt to continue working after retiring from their careers. Doing so keeps them active, keeps the money coming in, and can help bridge the gap to qualifying for social security.

“Say you’re only 63 now,” Hammortree says. “Let’s figure out, from a cashflow perspective, if we can get you out of one job and transition for the next five years. Maybe you’re making $150,000 now, but you could go make $80,000 somewhere if you’re willing to do it a few years longer.”

By pushing your retirement age—but still dialing back your work hours a bit—you’ll have to wait a little longer to be fully retired, but your years of retirement will be all the more comfortable for it.