There’s no such thing as an official retirement age in the U.S. You could decide to wrap up your career at 60. Or, you could keep plugging away until age 75.
However, it’s a pretty common thing for people to retire during their 60s. And a recent MassMutual survey of respondents aged 40 and older found that on average, 63 is the ideal age for retirement, according to both retirees and pre-retirees.
You may like the idea of wrapping up your career at 63. At that point, you may be young enough to have the energy to travel and pursue different activities, but you’re also not leaving the workforce at an unreasonably young age. But while retiring at 63 might sound appealing, here are some pitfalls you might encounter.
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1. You’re not yet eligible for Medicare
Anyone who’s ever had to pay for health insurance completely out of pocket can tell you just how expensive it can be. If you retire at age 63 and lose your health coverage, it’ll be another two years until you’re eligible for Medicare.
That could mean spending two years covering the cost of expensive premiums. And that could also mean not getting to enjoy those two years to the fullest anyway because your retirement income is all eaten up.
2. You’re not eligible for your full monthly Social Security benefit
You’re allowed to file for Social Security starting at age 62. So if you’re retiring at 63, it’s possible to claim benefits at the same time.
However, you’re not eligible for your complete monthly Social Security benefit based on your personal income history until full retirement age arrives. That age is either 66, 67, or somewhere in between, depending on the year you were born.
Now if your full retirement age is 67 and you sign up for Social Security at 63, you’ll slash your monthly benefit by about 25% — for life. And while it’s certainly possible to retire without filing for Social Security, for some people, the only way to make the loss of their paycheck from a job work is to fall back on those benefits in its place.
3. Your savings may need to last longer
If you have a family history of longevity, then it’s conceivable that you may end up living well into your 90s. But that could pose a challenge when it comes to preserving your savings.
Even if you have a decent 401(k) or IRA balance, if you retire at 63 and wind up living until age 98, that’s 35 years during which you need to stretch your nest egg. So while 63 isn’t a super early age to retire, it may be a super early age for you if you expect to live an exceptionally long life.
All told, retiring at 63 may work out for you just fine. But you also might struggle due to the factors above. So think carefully before settling on age 63 as your ideal retirement age. You may find that holding off just a bit longer is a better choice all around.
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2 Comments
I retired from a full time career at age 63 in 2011, and worked part time to supplement my SS monthly income until I qualified for Medicare. In my case I previously retired from state government at age 53 and received a monthly pension and paid lifetime health care premiums, so the combination of a pension, free healthcare, and my SS income allowed me to retire early. Furthermore, I calculated that taking SS early at 63 versus my full SS at 66, that the breakeven point was age 75 before my income disparity became negative on the income ledger. I am now 76, so now I am losing income each month had I waited for my full SS benefits. However, it is important to know the status of your health when deciding to take SS benefits early. After all, there was no guarantee that I would live to 75, particularly when I nearly died from a bleeding ulcer at age 61. But I am still kicking and have no regrets taking my SS early. I do get annual cola’s on my SS and pension and have managed to not struggle with my finances over that time. I would caution those who decide to take SS early that you have another source of income whether another retirement plan or through stable investments, because I know I would have struggled immensely if I relied on my SS alone.
Here’s a great reason to retire for SS @ 62: You may die before you collect a dime. My Dad died months away from early retirement @ 62–his third heart attack, btw. I’m 71 and retired early at ~62, and I have absolutely no regrets for doing so. If the government wants people to wait, then it should give American workers some nice, fat $$$ incentives for waiting until 65 or later! I’m sure they could think of some if they tried–but as usual, the government is looking for ways to cheapskate American citizens! (While going broke supporting illegals who haven’t contributed a dime to America’s prosperity! That makes the crime even worse.)