This article was updated on Oct. 14, 2016.
There is no set full retirement age in the U.S., but there are a few ages that are significant for retirement purposes. For example, age 62 is the earliest you can claim Social Security retirement benefits -- and there are also significant events at ages 59-1/2, 65, 66, 67, and 70. If you have a good knowledge of this timeline, you can determine your ideal retirement age and know whether there's a chance any of these ages might increase by the time you're ready to retire.
The five most significant "retirement ages"
Obviously, you have the ability to retire anytime you want, or not at all. Just look at Warren Buffett, still going strong at 85. However, there are some ages that are more significant to Americans' ability to retire than others.
- 59-1/2: This is when you are allowed to withdraw from your retirement savings such as 401(k)s and IRAs for any reason without paying a penalty.
- 62: This is the age when you're first eligible to collect Social Security retirement benefits. If you choose to file for Social Security earlier than your full retirement age, your benefit will be reduced.
- 65: This is the age when Americans become eligible for Medicare, whether or not they've filed for Social Security benefits yet. It's also a common full retirement age for many companies' retirement plans.
- 66/67: 66 is the current full retirement age for Social Security purposes. If you were born in 1954 or earlier, you can claim your full Social Security benefit at age 66. For those born after 1954, the retirement age will gradually increase (by two months per birth year) until it reaches 67 for those born in 1960 or later.
- 70 : This is the age where you have to start collecting Social Security. Well, technically, you don't have to. There's just no reason to delay benefits beyond age 70. This is also the age where you'll be forced to start withdrawing money from your pre-tax (non-Roth) retirement accounts. Starting when you turn 70-1/2, you'll be required to start taking required minimum distributions (RMDs) from your accounts, based on the IRS's life expectancy tables.
Will any of these ages change?
If you're relatively young (50 or under), there's a real chance that some of these retirement ages will change by the time you get there, especially in regard to Social Security. As I've written before, Social Security is not sustainable in its current form, and there are only two main ways to fix it -- increase taxes or cut benefits. And increasing the retirement age is a form of benefit cut that could go a long way toward solving the problem.
Now, increasing the Social Security retirement age isn't the most popular option to fix Social Security, nor is it projected to be the most effective. Tax increases would do much more to fix the problem and are supported by the majority of the population, so I'm reasonably confident that's the direction we'll eventually go. However, it's important to note that an increase in the minimum or full Social Security age is entirely possible.
What's your ideal retirement age?
Many people strive for early retirement but don't realize the drawbacks. For example, if you retire before age 65, you'll probably have to pay for health insurance out of your own pocket, unless you're one of the lucky ones who can keep your employer's plan. And if you retire before you can collect Social Security, 100% of your day-to-day expenses will need to be covered by your savings, which can deplete your nest egg quickly.
When I'm asked when I plan to retire, I say, "As soon as I'm financially comfortable for the rest of my life, and not a day later." I realize that's an unsatisfying answer, so here's a discussion that can help you figure out how much you'll need to save to be comfortable enough to retire, as well as a discussion of some things to consider before planning to retire early.
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