Early or Late Retirement (2024)

FAQs

Is it better to retire early or late? ›

A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30 percent. Starting to receive benefits after normal retirement age may result in larger benefits. With delayed retirement credits, a person can receive his or her largest benefit by retiring at age 70.

For Social Security purposes, full or normal retirement age typically means age 66 or 67, depending on when you were born. Early retirement for you could mean retiring at 62 but it could also mean retiring at 40 if you're interested in the FIRE movement.

While normal retirement age for most people usually means 65 or older, early retirement could give you more time to do things you enjoy or explore new interests. But it's important to build a solid financial foundation before leaving your day job behind.

You need cash now. With the rising cost of living, you may decide to claim your Social Security benefits early. From 2008 to 2009, nearly 36% of eligible men and 39% of eligible women started claiming benefits at age 62 for one simple reason — to pay the bills.

67-70 – During this age range, your Social Security benefit, if you haven't already taken it, will increase by 8% for each year you delay taking it until you turn 70. So, if your benefit will be, say, $2,500/month if you start at your full retirement age, it would be more than $3,300/month if you can wait.

Retiring early also means managing healthcare costs for the long haul. Remember, if you retire before age 65, you may need to have more saved to cover medical expenses in the years before you can apply for Medicare. You'll need to pay for healthcare coverage during that time and beyond.

While the average retirement age for workers in the United States is 64, that number varies as a result of many factors, including your Social Security benefit, your retirement savings, any pensions you might have, and even the lifestyle you want to live in retirement.

Pros of retiring early include health benefits, opportunities to travel, or starting a new career or business venture. Cons of retiring early include the strain on savings, due to increased expenses and smaller Social Security benefits, and a depressing effect on mental health.

You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.

December 31. As above, December 31 has the benefit of a full month of income with the pension starting the next day. This is a common date for federal employees, who are the kings and queens of gaming the retirement system. Retiring on December 31 is likely to maximize your unpaid annual leave check.

How to tell its time to retire? ›

Most people in the U.S. retire with less than $1 million. $500,000 is a healthy nest egg to supplement Social Security and other income sources. Assuming a 4% withdrawal rate, $500,000 could provide $20,000/year of inflation-adjusted income. The 4% “rule” is oversimplified, and you will likely spend differently.

As we have discussed, you are eligible to start claiming your benefit when you turn 62. But the benefit you receive at 62 will be permanently lower than if you wait. Every month past age 62 you don't claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit.

Most financial experts recommend waiting to claim Social Security. Dave Ramsey said you can claim Social Security at 62 if you're going to invest every dollar. Most retirees can't do this, and many shouldn't even if they can, because investing money you're going to need really soon can be too risky.

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

The very beginning or end of the year - If you don't have access to a healthy cash reserve that could cover multiple years, this might be a good option. When you do this, you're not pulling money out of your retirement account when you could be put in a higher tax bracket with earned income.

Working an extra year decreases mortality rates by 11%, a new analysis shows.

Depending on the year you were born, postponing taking Social Security until age 66 or 67 will allow you to receive full benefits. Based on 2021 data, men retire at an average age of 64.7 years, while women remain at work until age 62.1. Retirees at the age of 65 qualify for Medicare benefits.

When it comes to saving for retirement, the “time is money” cliché is golden. The earlier you can start saving and investing, the better. You'll have more time to take advantage of the power of compounding. That's when your original investment generates earnings (in the form of dividends or capital gains).