Is there truly an “ideal” retirement age?

“Retiring at age 65 is not, like gravity, an immutable law of the universe.” Donna McElroy

By Donna McElroy

Have you heard…

  • There were three wise men in the Bible?
  • If you drop a penny from a skyscraper, you could kill someone?
  • A pinch of salt in the water makes it boil faster?
  • The best retirement age is 65?

All of these well-known, oft-cited “facts” have some things in common.

For starters, none of them are factual at all. For instance, there is nowhere in the Bible that specifies there were three wise men.

The terminal velocity of a penny tops out at around 50mph, which is enough to bruise a person but not kill them.

Salt in boiling water could make the water boil more slowly.

The age commonly associated with retirement, 65, is anything but hard and fast.

Why age 65, anyway?

For nearly as long as most of us can remember, age 65 has been the arbitrary goalpost for retirement.

65 has been the age that triggers Social Security payments since 1935 when most people did not live past age 63.

There are several reasons bureaucrats and politicians chose this age.According to historians, the American architects of Social Security used Germany,

the first country to enact a national pension system in the 1880s, as their template. Under Otto von Bismarck, the Germans built a system intended for people 70 and older.

Those designers later lowered the age to 65. Turning 65 was also a benchmark for state-led public programs,

such as pensions for Civil War veterans and other state entitlements.

How can you know what YOUR best retirement age will be?

Before hitching yourself to the somewhat arbitrary age of 65 when planning your ideal retirement age, you should do a bit of soul-searching and ask crucial questions, such as:

Can I afford to retire?

For many people, their savings will decide the age at which they can retire. The typical American is likely to need around 80-85% of their current income to maintain their lifestyle in retirement. Will your current portfolio generate that amount? Will you be able to withdraw 3-4% of your nest egg without running out of money before you die?

Are you safeguarded against erosive factors such as higher inflation, sequence of returns, and other variables affecting how much you can safely withdraw each year?

Will you be able to put off taking Social Security benefits until age 70?

What will I don’t when I stop working?

Some people are so focused on the financial aspects of retirement that they forget to consider the psychological and emotional issues associated with leaving the workforce. University studies report that once the initial rush of no longer having to punch the clock dissipates, many retirees experience significant declines in their quality of life. If you don’t have at least a rudimentary outline of how you’ll stay engaged and active in your golden years, chances are high you’ll become bored and burned out, no matter how much you travel or how much golf you play. Four-fifths of retirees surveyed by financial services companies say they chose to return to work or volunteer not because they needed to but because they wanted to.

Your health is a factor.

There’s a significant possibility that unforeseen health issues may force you to retire long before you want. The Employee Benefit Research Institute determined that 46% of 2016 retirees left the workforce sooner than expected due to health issues or disability. Even if you don’t experience a chronic health issue, some careers take a toll on your body, making working longer impossible.

Experts expect medical care costs to increase annually, with no end in sight. A typical 65-year-old couple retiring in 2021 can expect to spend around $250,000 on healthcare costs not covered by Medicare. That estimate doesn’t even include long-term care costs, which can be mind-blowingly expensive. Since a chronic illness, injury, or disease may decide when you retire; it pays to incorporate potential health issues into your retirement plan.

Bottom line: Retiring at age 65 is not an absolute requirement. In reality, retirement at 65 may not be advisable for some, especially those with heavy debt loads,

mortgages, or who haven’t saved enough money. Modern lifespans are longer, and there is a chance that if you retire at 65, you could have thirty,

perhaps even forty years without income.

Does your current financial plan support this possibility, or will you run out of money when you stop working?

If you want greater clarity about your best retirement age, reach out to me at (504) 339-8762 ยท