What is the Best Age To Retire?

Many professionals agree that a financially comfortable retirement will require retirees to have an income somewhere between 70 and 80 percent of their pre-retirement income. For most individuals this will require multiple sources of income during retirement years such as: savings, investments, pensions and Social Security.

Although the average retiree’s Social Security will only replace about 40 percent of their pre-retirement income, the person’s age when they retire can make a huge difference in the size of their monthly benefit check.

So, what is the best age to start applying for Social Security? Unfortunately there is not a universal answer and the answer is unique to each potential retiree based upon their specific situation. Conditions such as an individual’s date of birth, health, family history, finances and even marital status play a big part in determining the best time to apply for social security.

So what are the retirement ages? Basically, the Social Security Administration has created three retirement age categories: minimum retirement age, full retirement age and maximum retirement benefit age.

Minimum retirement age is age 62. Nearly 60 percent of the Social Security recipients apply for their Social Security benefits at age 62. Unfortunately this early retirement is offset by a reduced benefit check for the rest of their lives. The actual amount the benefits are reduced depends upon several factors, but a good rule of thumb is that the benefits will be reduced by about one third.

Full retirement age is based upon an individual’s date of birth. At one time, full retirement age was 65 for every retiree, but over the years Congress has changed the laws and the full retirement age now varies between 65 and 67 depending on the year the person was born. A retiree who waits until full retirement age to begin drawing their Social Security benefits will receive a monthly check that will be about 25 percent higher than if they had retired at age 62.

Maximum retirement benefit age is age 70. If a person does not apply for their Social Security benefits at their full retirement age, but instead delays their retirement, they can increase their potential Social Security benefits by 8 percent for every year they delay retirement until 70. That is about 30 percent higher than if they retired at their full retirement age and it can be about 55 percent higher than if they retired at age 62.

If a person is a female and the women in her family typically live well into their upper 80s or 90s, then waiting until full or maximum retirement age could mean receiving many tens of thousands of dollars more during her lifetime. On the other hand, if a person is a male and the men in his family rarely live past age 70, then applying for Social Security benefits at age 62 may make more sense.

Although life expectancy is only one of many things a person needs to research and understand when deciding on the best age to retire, it is a good start. The important point to remember is that each person is unique.

Whether a person decides to retire at age 62, 70, or some age in between, the decision should only be made after careful research and planning with the help of a financial advisor. A hasty decision could mean losing out on money that could make the difference between a comfortable retirement and one that is less than desirable.

Due to regulatory constraints, we are unable to accept online comments on this article. However, if you have any questions or would like to discuss issues brought up in this article, feel free to call or email me at (813) 908-2701 or jeannie.holliday@raymondjames.com or Jodi Perez, CFPÒ at jodi.perez@raymondjames.com.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC.  Securities are not deposits, not insured by FDIC or any other government agency, not guaranteed by First National Bank of Pasco, and are subject to risks, including the possible loss of principal. Independent Financial Services and First National Bank of Pasco are independent of Raymond James Financial Services.                                            

Independent Financial Services, 20635 Amberfield Drive, Suite 102, Land O’ Lakes, FL 34638

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Jodi Perez and not necessary those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject o change without notice.