When To Stop Working: Deciding on the Ideal Retirement Age

Your retirement age is a personal decision based on your financial picture, your ability to work and other factors. Many people in the United States wait until full retirement age, so they can get the entire amount of their monthly Social Security payments. You can also keep working even after you begin collecting these benefits to save even more money for retirement.

When Is Full Retirement Age in the United States?

If your date of birth is after 1959, your full retirement age is 67 for Social Security purposes. If you were born from 1954 to 1959, you can begin drawing your full retirement at 66 plus a certain number of months depending on your birth year.

At age 62, you can begin taking early retirement benefits at a reduced rate. If you delay your benefits until age 70, you'll get larger monthly payments.

How Much Should You Have Saved by Retirement Age?

A 2022 Vanguard survey of more than 30 million investors found that the average American has about $141,542 in retirement savings. To get to the right number, many financial experts recommend the Rule of 25. First, make a budget to figure out how much monthly income you need for retirement. Multiply that number by 25 to reach an amount that will let you live off an annual 4% withdrawal for 30 years.

You can also aim for target savings of 12% to 15% of your annual income. That benchmark includes any match you might receive from your employer. For instance, if the company you work for matches 50% of your retirement contributions, putting aside 10% of your paycheck earns you a 5% match that gets you to the 15% goal.

What Other Factors Influence Retirement Age? 

It's helpful to review the pros and cons of retiring at various ages. Retiring before age 67 may allow you to enjoy better health for a longer period of retirement. However, your Social Security benefit payments will be lower, and you'll have less time to save and invest during your career. You also can't begin receiving health benefits through Medicare until age 65. 

Delaying retirement until 70 or later makes sense if you enjoy your work. Staying active can help keep you healthy. You'll also increase your monthly income if you don't begin taking Social Security benefits at 67 or earlier. However, it's important to note that the benefit amount stops increasing once you turn 70, so there's not necessarily an advantage to waiting longer. 

Taking your benefits at the full retirement age of 66 or 67 creates a balance between the length of retirement and monthly income. You can put more money aside during your career by taking advantage of "catch-up" contributions allowed by the IRS as you approach full retirement age. You can also enroll in Medicare for health care coverage.