Most working Americans aren’t aiming for an early retirement. A recent survey of nearly 5,100 U.S. employees by Willis Towers Watson found that far more working Americans are planning to retire after age 65 (46 percent) than before it (30 percent). And only 2 percent of those surveyed expect to retire before age 55. Here’s a look at when working people are expecting to retire, and the benefits and drawbacks of retiring at each age.
Age 65. Retirement at age 65 seems ideal to nearly a quarter (24 percent) of retirees. Leaving the workforce at 65 often makes sense because you can sign up for Medicare at this age and no longer need to rely on employer-sponsored health insurance. However, most baby boomers aren’t eligible to receive the full Social Security benefit they have earned until age 66. If they sign up for Social Security at age 65 their payments will be reduced by about 7 percent. So, a boomer who is eligible for $1,000 per month at age 66 would get $933 monthly if he begins payments at age 65. For people born in 1960 or later, the full retirement age is 67 and claiming payments at 65 would result in 13.3 percent smaller payments.
Age 70. The second most popular target retirement age is 70 or older, and nearly a quarter of workers say they are planning to work until their 70s, Willis Towers Watson found. Waiting until age 70 to sign up for Social Security will get you 32 percent bigger payments for most baby boomers. That would boost a $1,000 Social Security payment to $1,320 per month. People born in 1960 or later would get 24 percent more by waiting until age 70 to sign up for Social Security. However, only a small fraction of Social Security recipients actually wait until age 70 to claim payments. Delaying retirement until age 70 isn’t possible for everyone. Many people end up retiring unexpectedly early due to a health problem, layoff or to care for a spouse or other relative.
Ages 66 to 69. Some 18 percent of workers say they want to retire between ages 66 and 69. As far as retirement benefits go, this is likely to be a good decision. People who retire in this age range qualify for Medicare and unreduced Social Security benefits. They’re also old enough to take withdrawals from their retirement accounts without incurring the early withdrawal penalty, but aren’t yet required to take withdrawals if they don’t need the money yet.
Ages 62 to 64. The 11 percent of workers aiming to retire between ages 62 and 64 will have the option to sign up for a reduced Social Security benefit. Baby boomers who start Social Security payments at age 62 will get 25 percent smaller monthly payments, which would reduce a $1,000 monthly payment to $750. Those born in 1960 or later who sign up for Social Security at age 62 will get 30 percent smaller payments. People who retire in their early 60s aren’t eligible for Medicare and need to find health insurance form another source. Some companies provide retiree health insurance to departing employees until they qualify for Medicare. You may also be able to buy health insurance through your state’s health insurance exchange. You could take penalty-free withdrawals from your retirement accounts to help cover the cost of the premiums.
The Willis Towers Watson survey found that financial concerns play a role in the age people expect to retire. Employees who plan to work past age 70 are more likely to report stress, poor health and feeling stuck in their jobs than people expecting to retire sooner. “The only way for many employees to achieve retirement security and overcome inadequate savings is to work longer,” says Steven Nyce, a senior economist at Willis Towers Watson.
Aiming for a specific retirement age can help you decide how much to save and make preparations for retirement. But it’s also a good idea to save a little more than you might need, just in case you find yourself retired ahead of schedule. The timing of your retirement isn’t always within your control.
Emily Brandon is the author of “Pensionless: The 10-Step Solution for a Stress-Free Retirement.”