Your retirement age shouldn't be an arbitrary number you pick out of a hat. Rather, you'll need to put some serious thought into that age to ensure that you retire at what turns out to be the right time.

While there's no such thing as an official U.S. retirement age, there are a few age-related milestones you should know about:

  • 59-1/2 is the earliest age to take penalty-free 401(k) or IRA withdrawals.
  • 62 is the earliest age you can claim Social Security.
  • 65 is the age you become eligible for Medicare coverage.
  • 66 is the age at which workers born in 1954 or earlier can file for Social Security and collect their full benefits; this age increases to 67 for those born later.
  • 70 is the age at which you stop accruing Social Security delayed retirement credits.
  • 70-1/2 is the age at which you must starting taking required minimum distributions from your traditional IRA or 401(k).

Of course, you don't need to retire at one of the above ages. In fact, you can retire at any age you want, provided you follow these key rules.

Senior couple reading on a picnic blanket


Rule 1: Make certain your savings are adequate

An overwhelming number of seniors neglect to save independently for retirement and instead wind up banking on Social Security later in life. This is a huge mistake since Social Security is only designed to replace roughly 40% of the typical worker's pre-retirement income. Most people, however, need at least 70% of their previous income to pay the bills once they stop working -- and that assumes a relatively frugal lifestyle. If your goals include traveling the globe and joining a country club, you'll need considerably more money in retirement.

That's why your savings will ultimately play a huge role in dictating your retirement age. Say you create a retirement budget and determine you'll need $2 million from independent savings to cover your expenses. If, come age 60, you have $2 million sitting in your 401(k), you can feel free to pull the trigger, assuming you've also accounted for the fact that you'll need to pay for your own health plan until Medicare kicks in. On the other hand, if, come age 67, you're still $100,000 short of your goal, it might pay to work a few more years and amass enough savings to support the lifestyle you really want.

Rule 2: Maximize your Social Security benefits

Your Social Security benefits are based upon your top 35 years of earnings, but you can raise or lower those benefits depending on when you first claim them. If you wait until full retirement age, you'll collect what's essentially your base benefit amount in full. But if you file earlier, you'll lose a portion of your benefits -- for life. Similarly, if you delay your benefits up until age 70, you'll get an 8% boost for each year you hold off. (Technically, you don't need to file for Social Security at 70, but there's no incentive to wait at that point.)

Because many people retire and claim benefits simultaneously, it's best to stop working at an age that allows you to maximize those payments so that you get the most out of Social Security in your lifetime. That means taking a long, hard look at your health and, morbid as it may seem, making an educated guess as to how long you'll live. While waiting until full retirement age or later to claim Social Security is a good move for those who live well into their 80s, if you don't expect to make it that far, you may be better off filing early and cutting your payments, but getting a higher lifetime payout overall.

Here's an example. Say your full retirement age is 67, at which point you'll be eligible for $1,600 a month in benefits. Retiring at 62 and filing for benefits then will cut those payments down to $1,120, but you'll also collect more of them. If you live until age 78.7, you'll collect roughly the same lifetime payout regardless of whether you first claim benefits at 62 or 67. But if you only live until 75, you'll get an extra $21,000 in benefits by virtue of having filed at 62.

Now if you're not counting on Social Security to pay the bills, and you're really not concerned with how much you get out of it, then you can skip this particular rule and choose a retirement age based upon other factors. But if you're among the millions of seniors who depend on those benefits to stay afloat financially, you'll need to time your retirement in a way that lets you collect the maximum total lifetime payout.

Rule 3: Be sure you're really ready to give up your career

Some people go to work just for the money, but for others, having a job means more than just a paycheck. If you like what you do and get non-monetary benefits from your job, like the opportunity to socialize, then you'll need to think about whether you're really ready to wind down your career.

Now, it could be the case that come age 65, you're burned out, exhausted, and just plain ready to call it quits. If your savings are in good shape, and you therefore don't need the money you'd collect in your paychecks, then it may be time to retire. But if you're still enjoying your job at that age, it might pay to keep at it -- again, regardless of whether you actually need the money.

Remember, you don't have to retire just because you reach a certain age, nor does it matter if you're the oldest employee in your company. Extra money aside, numerous research has shown that working longer can help stave off depression, and, as per a new Oregon State University study, actually prolong your life. If working at your job is a fulfilling experience, you might as well do so until you reach the point where you're no longer physically able to get yourself into the office -- no matter what age that happens to be.

Pinpointing the perfect retirement age is easier said than done. Follow these rules, and you'll have a less stressful time making that decision.