There's no such thing as an official retirement age in the U.S. You could decide to wrap up your career at 60. Or, you could keep plugging away until age 75.
However, it's a pretty common thing for people to retire during their 60s. And a recent MassMutual survey of respondents aged 40 and older found that on average, 63 is the ideal age for retirement, according to both retirees and pre-retirees.
You may like the idea of wrapping up your career at 63. At that point, you may be young enough to have the energy to travel and pursue different activities, but you're also not leaving the workforce at an unreasonably young age. But while retiring at 63 might sound appealing, here are some pitfalls you might encounter.
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1. You're not yet eligible for Medicare
Anyone who's ever had to pay for health insurance completely out of pocket can tell you just how expensive it can be. If you retire at age 63 and lose your health coverage, it'll be another two years until you're eligible for Medicare.
That could mean spending two years covering the cost of expensive premiums. And that could also mean not getting to enjoy those two years to the fullest anyway because your retirement income is all eaten up.
2. You're not eligible for your full monthly Social Security benefit
You're allowed to file for Social Security starting at age 62. So if you're retiring at 63, it's possible to claim benefits at the same time.
However, you're not eligible for your complete monthly Social Security benefit based on your personal income history until full retirement age arrives. That age is either 66, 67, or somewhere in between, depending on the year you were born.
Now if your full retirement age is 67 and you sign up for Social Security at 63, you'll slash your monthly benefit by about 25% -- for life. And while it's certainly possible to retire without filing for Social Security, for some people, the only way to make the loss of their paycheck from a job work is to fall back on those benefits in its place.
3. Your savings may need to last longer
If you have a family history of longevity, then it's conceivable that you may end up living well into your 90s. But that could pose a challenge when it comes to preserving your savings.
Even if you have a decent 401(k) or IRA balance, if you retire at 63 and wind up living until age 98, that's 35 years during which you need to stretch your nest egg. So while 63 isn't a super early age to retire, it may be a super early age for you if you expect to live an exceptionally long life.
All told, retiring at 63 may work out for you just fine. But you also might struggle due to the factors above. So think carefully before settling on age 63 as your ideal retirement age. You may find that holding off just a bit longer is a better choice all around.
