What is the best age to retire?

Determining what is the best age to retire is a complex question for workers. Retire too early, and you risk running out of money. Waiting too long can sap you of valuable time with loves ones and the ability to pursue your interests. 

Here's how to decide when to retire, including the four primary factors that influence retirement age, the pros and cons of retiring at different ages, and tools that can help.

What is the best age to retire?

The typical retirement age ranges from 62 to 67 years old. Not because there's something magical about these ages, but simply because workers often base their retirement on access to Social Security benefits. For example, full Social Security retirement benefits start at age 67 for people born in 1960 or later. Whether you have a 401(k), pension, or investments, Social Security typically makes up a significant portion of your retirement income.

The best age to retire varies dramatically depending on your finances, health, and goals. That being said, most people dream of early retirement so they can stop working, spend more time with family, and travel while they can still enjoy it. Retiring early allows you to pursue hobbies and travel while you're still young enough to experience them without too many health problems getting in the way. However, if you don't save enough, you may have to work longer or adjust your retirement expectations.

Factors that will influence your retirement age

While early retirement may be your goal, the determining what is the best age to retire involves numerous factors. These factors include your finances, health, goals, and family circumstances.

Financial readiness

One of the most important factors in determining retirement age is your financial readiness. You'll need a certain income to retire which allows you to cover your monthly bills, pay off debt, and absorb the impact of inflation. The size of your "nest egg" varies for each person based on your sources of income, monthly expenses, planned retirement activities, estate planning goals, and other factors.

Having multiple sources of income can reduce the need for larger retirement savings. Beyond Social Security benefits, retirement income sources may include dividends, interest income, rental income, pensions, and part-time work. Full retirement age ranges from 65 to 67, depending on your birth year. For every year you delay filing for Social Security, your monthly benefits increase by 8%. Delaying retirement until age 70 provides the largest Social Security benefit. This not only provides more income while you're living, but it can also increase the monthly income for your surviving spouse, minor children, and disabled dependents.

Paying off debt and reducing your monthly expenses can also improve your financial readiness for retirement. Eliminating debt reduces your monthly obligations. Analyzing your spending to find areas to cut or minimize also helps reduce the amount of income you need.

Health and longevity

Being healthy and having a long life expectancy can impact your retirement readiness positively and negatively. People who are healthier tend to have fewer medical expenses, which keeps your costs low. However, having good health tends to correlate with living longer. A longer life expectancy means that your retirement savings need to last for a longer period of time.

Insurance costs tend to rise as you age, which means you'll need to dedicate more of your income to paying these costs. Insurance costs include medical insurance, long-term care insurance, life insurance, and more. Fortunately, your medical insurance premiums will decline dramatically upon reaching Medicare eligibility at age 65. However, early retirees often face dramatic insurance costs when they leave the workplace and lose employer subsidies toward their premiums.

Personal goals

Personal goals may be one of the biggest motivations for retiring early. The reasons can be anything under the sun, but the "why" for early retirement is often the one that motivates you to cut spending, save more, and turn in your resignation letter. Some people retire early to pursue charity work for causes they support, take on jobs that provide more fulfillment over a paycheck, or attend classes to learn topics that piqued their interest.

Often, the personal goals are hard to justify and your friends and family may not understand or appreciate them. But these personal motivations are the strongest and most meaningful for each person.

Family and lifestyle considerations

Many workers consider early retirement to support their children, grandchildren, or other family members. It is often said that you're part of the "sandwich generation" when caring for both aging parents and young children. Unfortunately, leaving work early to tackle those family responsibilities means skipping out on peak earning years. Not only are you missing out on that income, but you're also not making retirement contributions. Additionally, many people in this situation are drawing down their savings to cover monthly bills or paying for the expenses of the people they're caring for.

The location you retire to can also make a big impact on your ability to retire early. People often move closer to family or to activities that they'll have more time for in retirement, such as hiking, fishing, or golf. Moving to a lower cost location means that you'll have less expenses each month. In some cases, you may be able to pay cash for a home or have a significantly smaller mortgage payment.

Pros and cons of early retirement (50s–early 60s)

Pros

• More time for family and friends. Job responsibilities often make it challenging to spend enough time with family and friends. By retiring at an earlier age, you'll free up time to enjoy relationships and support the people you care about the most.
• Better health. Retiring earlier allows you to take advantage of your younger age and better health. Health problems in retirement can affect your longevity, mental health, and finances.
• Time for other pursuits. Quitting work before traditional retirement age gives you time to pursue other interests without worrying about making an income. You can donate time to charitable causes, take college courses, or learn new hobbies.

Cons

• Lost peak earning years. Wages during the last decade before retirement tend to be the highest. Not only will you miss out on income, but you won't be able to boost Social Security benefits or make additional retirement plan contributions.
• Smaller Social Security benefits. Filing for Social Security benefits before full retirement age reduces your monthly income by 8% for each year.
• Higher withdrawals. Retiring early means that you'll start withdrawing at a younger age and will need a larger nest egg to support those withdrawals.

Pros and cons of traditional retirement (65–67)

Pros

• Full Social Security benefits. You'll receive full retirement benefits if you wait to claim Social Security until ages 65 to 67, based on your birth year.
• Larger retirement savings. Delaying retirement to age 65 gives you more time to contribute to workplace and individual retirement accounts. This also gives your investments more time to compound.
• Reduced medical expenses. Staying on your workplace medical plan reduces your insurance costs compared to buying an individual plan. Waiting to retire until age 65 and above allows you to transition into Medicare insurance, which is more affordable than buying insurance on your own.

Cons

• Reduced time in good health. As we get older, health problems tend to increase. These ailments can limit our enjoyment in retirement and our ability to pursue other passions.
• Loss of social networks. Leaving the workplace can also mean leaving behind friendships that support mental health. Waiting too long to retire also means that friends and family start passing away before you can spend more time with them.
• Forgoing maximum benefits. You can start receiving Social Security benefits at full retirement age. However, if you delay them until age 70, you'll receive the highest monthly benefit.

Pros and cons of delayed retirement (70+)

Pros

• Full Social Security benefits. By delaying your Social Security benefits until age 70, you'll receive the maximum monthly income. Waiting past your 70th birthday doesn't provide any additional benefit.
• Reduced retirement duration. Waiting to retire means that you'll have fewer years of income that you'll need to fund. This reduces the amount of money you'll need to save for retirement.
• High spousal survivor benefits. Not only will your Social Security monthly income be higher, but your surviving spouse may also receive more money if they use your benefits instead of theirs. This is especially helpful for stay-at-home parents and spouses in low-paying careers.

Cons

• Mandatory minimum distributions. Even if you're still working, traditional retirement plans like a 401(k) or IRA have required minimum distributions at age 73. These distributions can bump you into a higher tax bracket, meaning that you'll receive fewer dollars from those distributions. If you don't make the withdrawals, you'll be penalized up to 25% of the amount not taken.
• Not reaching breakeven point. While your monthly Social Security benefit will be higher if you wait, you may not live long enough to break even. If you live past age 79, you'll come out ahead by waiting until age 70 to start collecting Social Security benefits.

Tools and strategies to decide your retirement age

It is helpful to use special calculators and strategies when thinking about what is the best age to retire. This approach can provide peace of mind when you're on track to your goals or have a game plan on how to catch up.

Retirement calculators

The Social Security Administration (SSA) provides free online calculators for workers to calculate how much they can expect in retirement. Whether you retire at 62, age 66, or later, the changes in your monthly benefit can be significant. Using the 4% Rule, for every additional dollar in Social Security benefits you receive, that's $25 less you'll need in savings.

Retirement calculators are available through retirement plans, pension companies, and financial websites and apps. Calculators for your retirement accounts and pensions may focus on those specific accounts, while others can be more comprehensive in estimating retirement income based on all of your assets.

Scenario planning

If you're unsure of when you want to retire, scenario planning can help you compare the financial impact of retiring early versus retiring at a traditional age or later. For example, if you retire at 62, you could lose up to 30% of your Social Security benefit. Comprehensive scenario planning calculates the impact of fewer retirement plan contributions, less time for compounding, and higher withdrawals. Additionally, when you retire at a younger age, you tend to be more active, so you'll need to factor in those additional costs of travel, activities, and other hobbies.

Consulting with a financial planner

While there are numerous online tools and apps that can calculate your financial readiness for retirement, you may not understand the results they provide. Consulting with a financial planner provides personalized goals and an opportunity to discuss the nuances of your retirement vision. Financial planners not only answer your questions, but they'll discuss topics that you may not have thought about. This can avoid mistakes in your retirement plan that can derail your finances.

Some financial planners offer the first meeting for free or a nominal fee to determine if you're a good fit for working together. Typical fee arrangements include commission on products sold, a flat fee per visit, annual retainer, hourly rate, or a percentage of assets under management. Knowing which fee arrangement appeals most to you can narrow down your choices when seeking a financial planner.

Should you retire early?

Many want to retire early so they can spend more time with family, travel the world, and pursue hobbies without worrying about earning a paycheck. When thinking about the best age to retire, it is a personal decision based on your finances, health, and goals. While there are many rules of thumb to determine how much you need to retire, the reality is that the size of your nest egg depends on how much you spend each year, how long you’ll live, and what other sources of income you have. If you’re unsure if you’re on the right path to reach your goals, use an online calculator or consult with a financial advisor.