What is the Average Retirement Age?
The Federal Bureau of Labor Statistics and academic organizations like The Center for Retirement Research at Boston College publish data and articles that dissect trends about the average retirement age. Interestingly, from the early part of the 20th century until about 1990, the retirement age for men steadily declined from 66 to 62. After that time, the trend reversed and started climbing to where today, men retire on average just before age 65. Women, on the other hand, have had a steady rise in retirement age from 53 in the 1960s to 62 in 2021, in large part due to the shift to working outside the home. We saw a monumental shift in Social Security benefits in the 1980s, when the full retirement age increased from 66 to 67, and in workplace retirement plans in the 1990s when defined benefit plans (a.k.a. pensions) shifted to defined contribution plans (a.k.a. 401k). Among the other significant factors in the age increase is the increase in longevity and health. Just like all statistics, these are averages, and when you retire depends a lot on your circumstances, desires, and life choices.
If there’s one thing I want to stress, it’s that there is no right or wrong time. Some of it depends on what retirement means to you. I grew up thinking it meant you don’t work, sit at home in front of the TV, and play Minesweeper. I sternly rejected that idea and overcompensated, thinking, “I’ll always work till the day I die.” That led me not to plan ahead and thus not start saving. I’ve settled in the middle of these two extreme pictures I’ve painted. I’ve started to think about retirement as transitioning to do the work I want to do instead of the work I think I have to do. As an aside, that’s why I became a financial planner. So, sometimes, I joke with people that I’m retired!
Still, some, like my Uncle Bob, never really “retire” completely. He worked until the end of his life, into his mid-80s, traveling between cities with my aunt, visiting their children and grandchildren, and consulting with his passion for chemistry and lubricant technologies.
The trend is clear: More in the US plan to retire later. Some are doing that out of necessity, others because they don’t know what else they’d do, and still others because work doesn’t seem like work. The Dala Group works with clients across the spectrum and walks with you to determine how best to position yourself, the timing of life’s transitions, and how to sustain your lifestyle with what you have at your disposal. Here are my short answers to some of your burning questions.
What if I haven’t saved?
It’s never too late to start saving. So, start now. Did you know that if you save $1,000 per month from age 55 to 65 and get a 10% rate of return on that money, you’ll have $200,000? That’s much better than if you bury your head in the sand and accept your savings failure. So, get going. Don’t wait. Don’t let the discouragement with where you are stop you from making different choices for tomorrow. Cut out unnecessary spending. Find a way to bring in more income. We have experts on staff who can help you find money in your budget or talk about ways you can increase your income so you get on track.
What if I want to retire now?
Remember, you can’t access retirement accounts penalty-free until age 59 ½. If you plan to retire before that time, you’ll want to contribute to a taxable brokerage account to create a bridge of funds to get you from when your regular income stops to when you can start drawing on your retirement accounts or collecting Social Security.
What about me or my loved one’s health?
Maybe you want to retire due to a health event because you’re not sure how long you have to be with your loved ones. Maybe you retire early to take care of an aging parent or a child with adult developmental disabilities. These are all real and challenging circumstances. We have the heart to walk through these trials with our clients and help you know what is wise, where to say no, and where to feel free to say yes. We do this by showing the long-term impact of, for example, the meaningful trip you want to take because of a recent diagnosis or how long your assets will last if one of you were to experience a more pronounced health event that requires long-term care.
How can I prepare?
Regardless of where you’re at. Here is my guidance for positioning yourself:
Prioritize eliminating consumer debt, such as car loans, credit cards, and student loans, to free up more cash to build wealth.
Prepare by consistently saving from as early an age as possible. A great target is 15% of your household income.
Continue to live within your means as you increase your income over time. Lifestyle creep is real. If you’ve done the first two things on this list, the additional money you earn can go towards other spending goals (like replacing the roof or a vehicle), generosity, and fun.
Aim to pay off your mortgage so you are free and clear by the time you stop working, or sooner. This frees up your largest monthly expense and gives your living situation maximum stability. The more income you free up, the more you have for giving, building wealth, and enjoying the experiences money affords.
With these four pillars at work, you’ll achieve your vision for retirement, whatever that means to you. With our tools and expertise, The Dala Group can give you confidence no matter where you are on your journey. Contact us today if you want guidance tailored to your circumstances. We’d love to help carry that load.
