Whenever I am hosting a retirement planning workshop, one question I really enjoy asking the audience is, “what is the age of retirement in the U.S.?”. I receive many answers to this question, but the one answer I seem to get most often is – 65. Which then leads me to another question – “where did you come up with that age?”. The answer usually is a blank stare, but I do occasionally hear, “well, that is when my parent(s) retired”, or “I think I read that somewhere one time”. Well, I would like to use this blog post to discuss this question and share my thoughts on this matter.
First, where did the opinion/belief/hope that age 65 entitles people to head off to that golden time of their respective lives known as retirement? My thought is many companies that once upon a time offered a traditional pension plan (also known as a defined benefit plan) used the age of 65 to define “full retirement age”. As you are probably already aware, most companies no longer offer a traditional defined benefit or pension plans to their workers. Instead most of us would be covered under a 401(k) or 403(b) plan, known as a defined contribution plan.
In addition, when Social Security was first established age 65 was the age where one would receive his or her full Social Security benefits, however, under current law, full retirement age for Social Security purposes is currently 66 and will transition to 67 for those born in 1960 and later.
In my opinion, the real question individuals should be asking themselves is not what age can I retire (although there are age requirements for certain tax and health insurance benefits, i.e. you must be 65 to receive Medicare benefits, with 2 minor exemptions that I will not cover here), but rather, how much money do I need to have saved up in order to retire and live a comfortable lifestyle. You see it is not a question of age but a question of money. In theory, someone can be 75 and still working because they cannot afford to retire, and someone who is blessed financially can be “retired” at 30. That is why I believe it takes money to retire, not a specific age.
In coming blog posts I will discuss how much money one should potentially have before retiring and other related topics. I say how much money one should potentially have for a reason. Retirement is different for everyone. It is unique to the individual. Some people plan to travel extensively, pursue a lifelong passion, or maybe start a business they have already dreamed about. Some may plan to purchase a beach home, a mountain home, or maybe even both. While some may just choose to spend their retirement years volunteering, staying close to home, and living in the same house they have been living in for over 30 years. Depending on an individual’s specific retirement plans, the financial need, or retirement savings goal, can vary greatly.