I’m asked, either directly or more often – indirectly, about when it’s best to retire. Or some version of “what is the best retirement age?”
And as you might suspect, as with many personal finance matters, it’s more personal and less of a purely financial decision.
In other words, it depends.
In fact, according to the Social Security Administration (SSA), their definition of your “full retirement age (FRA)” depends on when you were born.
As you’ll see in the chart on this page from the SSA, if you were born in 1937 or earlier, your FRA is 65.
If you were born in 1960 or later, your FRA is 67.
And if you were born between 1937 and 1960, your FRA will fall somewhere between 65 and 2 months to 66 and 10 months.
But these full retirement ages really only impact your Social Security retirement benefits, if you’re eligible to receive them.
And regardless of the year you were born or when your FRA is, you can still retire whenever you want. Your retirement date can be completely different than when you elect to start receiving your Social Security retirement benefits.
So, your Social Security decisions can relate your best retirement age, but they aren’t necessarily dependent upon it.
Another perspective on when the best time to retire involves the timing of accessing accumulated retirement savings.
If you have money in a 401k, 403b, IRA or other tax-deferred retirement accounts, in most cases (not all) you can’t access these funds prior to age 59 1/2 without paying a 10% penalty.
This is in addition to this money likely being taxed as ordinary income in the year you take it out of your retirement account.
So if you’re planning to retire prior to age 59 1/2, be sure to consider the accessibility and potential tax liability associated with funds in your retirement accounts.
Among the possible exceptions to the penalty associated with taking funds from a company retirement account prior to 59 1/2, one of the most notable is also tied to your age.
If you retire (or are terminated) from your job at age 55 or later, you can take funds from your employer retirement plan (401k, 403b, etc.) without penalty.
Note: this only applies to your current employer plan; not any retirement plans from prior employers.
This doesn’t mean 55 is the best retirement age any more than another age. But it’s one more financial item for you to consider.
If you’re eligible for a company pension, many of these benefits are dependent upon your age.
For example, I’ve encountered many pension plans where you can start eligible benefits as soon as you retire. But if your retirement is before age 65, for example, your benefits might be reduced.
And if you’re eligible for a pension but defer benefits for one or more years after you retire, you might be eligible for a higher benefit amount.
The above are just a few of the factors that might impact your decision about the best age to retire.
But ultimately, you only get one shot at life.
I only get one shot at life.
None of us are getting out of here alive.
So while you want to make smart, informed decisions about the best retirement age for your situation, be sure not to focus solely on the financial considerations.
Be sure to also think about your life and your lifestyle.
Think about your health and how you want to spend time in retirement.
Consider your family and friends and how much you want to spend time with them while you can.
Life is precious and tomorrow isn’t promised.
My advice: retire as soon as you’re confidently and comfortably able to.
And let’s be honest… we each have our own ideas and opinions about what retirement means to us. I encourage you to define your own unique version of retirement success and let that be the guide star in your retirement planning.
If you’re thinking about your own retirement and would like some assistance in figuring out how soon you can confidently and comfortably plan to retire, get in touch and let me know. That’s what I do for folks like you.
And as far as the best retirement age?
Well, ultimately you’ll be the best judge of that. That’s the “personal” part of personal financial planning.
P.S. – Many of the professional women I work with and am introduced to want to discuss how they can help support and take care of their aging parents. And while this is an important conversation to have, it’s important that they don’t jeopardize their own financial situation in the process.
Note: none of the above constitutes tax or legal advice. Please consult the advice of a qualified legal or tax advisor regarding your own situation.