Should you wait until 65 to retire? The complete guide to making your choice.

According to a 2024 MassMutual study, the average American retires at 63, but a significant number regret their timing due to unforeseen challenges like health issues. This raises a critical question for many: should you wait until 65 to retire, or is an earlier or later departure from the workforce a better fit for your personal circumstances?

Quick Summary

Deciding when to retire involves a careful evaluation of finances, health, and personal goals, not just hitting a specific age like 65. The right timing is unique to each individual and depends heavily on factors like your Social Security benefits, access to health insurance, investment portfolio, and lifestyle plans. Weighing the pros and cons of retiring early, on time, or later is key to a secure and happy transition.

Key Points

• Retirement Age is Not One-Size-Fits-All: The best time to retire is a personal decision influenced by a mix of financial, health, and lifestyle factors, not just reaching age 65.

• Early Retirement Impacts Social Security and Health Insurance: Claiming Social Security before your full retirement age (FRA) means permanently reduced benefits, and you'll need to secure costly private health insurance until Medicare eligibility at 65.

• Delayed Retirement Increases Your Benefits and Savings: Working past 65 can significantly increase your monthly Social Security payout (up to age 70) and give your retirement savings more time to grow.

• Healthcare Costs Are a Major Factor: Plan for substantial healthcare expenses in retirement, as Medicare eligibility begins at 65, and early retirement requires securing and paying for health insurance independently.

• Emotional Readiness is as Important as Financial Planning: Consider how you will find purpose and fill your time in retirement, as the loss of a career can lead to boredom or a loss of identity if not prepared for.

• A Financial Advisor Can Help Navigate Complexity: A professional can help you evaluate your entire financial picture, including investments, savings, and projected expenses, to build a comprehensive and personalized retirement plan.

Deciding When to Retire: More Than Just a Number

For decades, age 65 has been the golden benchmark for retirement, largely because it's the traditional age for Medicare eligibility. However, with shifting economic realities, changes to Social Security, and longer life expectancies, this once-simple timeline is now a complex calculation. The best age for you might be 62, 65, 67, or even 70 or later. Your ideal retirement age is a deeply personal decision that requires a thorough review of your financial readiness, health status, and emotional preparedness.

The Allure and Risks of Early Retirement (Before Age 65)

Retiring before 65 can offer more freedom and stress reduction, allowing time for passions or new ventures. However, it means permanently reduced Social Security benefits if claimed before your full retirement age (FRA), which is 67 for those born in 1960 or later. You'll also need to cover healthcare costs until Medicare eligibility at 65, and your savings must last longer, increasing the risk of running out of money. Early retirement can also lead to a loss of identity if not properly planned for.

The Traditional Path: Retiring Around 65

Retiring at 65 aligns with Medicare eligibility, providing crucial health coverage. It also offers a balance between time in the workforce and retirement years, allowing more time to save. However, if your FRA is 67, retiring at 65 still results in a reduced Social Security benefit. Continuing a physically demanding or high-stress job until 65 could also negatively impact your health.

The Advantages of Delayed Retirement (After Age 65)

Working past 65, up to age 70, increases your monthly Social Security benefit by about 8% for each year you delay claiming past your FRA. This also allows more time to save, including catch-up contributions, and shortens the period your savings need to cover. You may also maintain employer health coverage, potentially delaying Medicare premiums, and work provides mental and social engagement. A risk, however, is that health issues could force an unplanned early retirement, limiting your ability to enjoy those years. Delayed retirement also means postponing planned leisure activities.

Comparison Table: Early vs. On-Time vs. Delayed Retirement

Factor	Early Retirement (Before 65)	On-Time Retirement (Age 65)	Delayed Retirement (After 65)
Social Security Payouts	Reduced monthly benefit; start at 62.	Reduced benefit if FRA is 67; full benefit if FRA is 66.	Higher monthly benefit for each year deferred up to age 70.
Healthcare Coverage	Private insurance required until 65, potentially very costly.	Eligible for Medicare, offering significant coverage at 65.	May continue employer plan, delaying Medicare and its premiums.
Savings Longevity	Nest egg must last longer, increasing risk of running out of money.	Savings stretched for fewer years than early retirement.	More time for savings to grow, shorter retirement period.
Time for Leisure	Maximum time for travel and hobbies while younger and more mobile.	Balanced time for work and leisure.	Less time for leisure in younger retirement years.
Emotional Readiness	May require a stronger plan to replace identity and purpose of work.	Often aligns with societal norms, potentially smoother transition.	Prolonged sense of purpose from continued work.

Making the Right Decision for You

Choosing your retirement age requires balancing personal desires with financial realities and health considerations. It's a dynamic process, not a fixed date. Assess your finances, use calculators to estimate Social Security benefits, and project savings longevity. Consider your emotional readiness and what you want your retirement to look like. Discuss your plans with your partner and a financial advisor to create a comprehensive plan. For further guidance on calculating and planning for retirement, explore resources from the Vanguard website.

Conclusion: The Ultimate Retirement Age is Personal

Ultimately, deciding whether to wait until 65 to retire is about aligning your finances, health, and personal goals. By evaluating these factors, you can design a secure and fulfilling retirement. Proactive planning is key to a vibrant retirement, no matter your target age.

Frequently Asked Questions

What is the full retirement age (FRA) for Social Security?

The full retirement age for Social Security depends on your birth year. For anyone born in 1960 or later, the FRA is 67. For those born between 1943 and 1959, the FRA is between 66 and 67.

What is the downside of retiring before age 65?

Retiring before age 65 means you will receive permanently reduced Social Security benefits if you claim them early, and you will be responsible for covering your own healthcare costs until you become eligible for Medicare at 65. Your savings will also need to last for more years.

What are the financial benefits of delaying retirement past 65?

By delaying retirement past your full retirement age (up to age 70), your monthly Social Security benefit increases significantly. You also have more years to save for retirement and fewer years for your savings to be stretched, improving your financial security.

How do I cover my health insurance if I retire before age 65?

If you retire before age 65, you will need to find alternative health coverage. Options include COBRA from a former employer, a plan from the Affordable Care Act (ACA) marketplace, or potentially joining a spouse's health plan.

Is it better to take Social Security at 62 or wait until 70?

Waiting until 70 to claim Social Security results in a much larger monthly benefit, while claiming at 62 gives you a permanently reduced benefit. The best choice depends on your personal health, life expectancy, and financial needs. If you need the income sooner, 62 might be necessary, but if you can wait, 70 offers the maximum payout.

What should I consider besides finances when deciding to retire?

Beyond finances, consider your emotional and psychological readiness. Think about how you will fill your time, maintain a sense of purpose, and stay socially engaged. Retirement can be a big emotional transition, so planning for a new routine and hobbies is crucial.

Can I still get Medicare if I am working past age 65?

Yes, you should still sign up for Medicare at age 65, even if you are still working and have employer health insurance. However, depending on the size of your company and the quality of your employer's plan, you may be able to delay signing up for Medicare Part B without penalty.