Have you ever wondered why age 65 is considered the “normal retirement age”? What if you plan to retire earlier or later, or phase out of the workforce? Here’s how to time it just right.
Age 65 has long been considered the typical retirement age, but Americans have different thoughts on when to retire.
It shows that each generation plans to retire earlier than the last, according to the 2023 Principal Financial Well-Being IndexTM. And more and more people are thinking about retirement in a different way. Instead of retiring all at once, they want to slowly cut back on their work hours.
You’re not the only one who thinks about when they can finally hang up their work boots for good. Maybe you’re stuck in traffic on your way to work in the morning and ask yourself, “How many more years of this do I have left?”
The Evolving Retirement Age: Not Just 65 Anymore
For many years, 65 years old was seen as the “normal retirement age” in the United States. But times are changing, and so are the ways we think about when to quit our jobs.
The Principal Financial Well-Being Index for 2023 shows that each generation plans to retire earlier than the previous one.
- Silent Generation (born 1928-1945): Traditional retirement was common for folks currently over 75
- Baby Boomers (born 1946-1964): Typically plan to go directly from full-time work to retirement around age 68
- Gen Xers (born 1965-1980): Desire a phased approach starting around age 64
- Millennials (born 1981-1996): Looking at a gradual decrease in hours starting around age 59
- Gen Z (born 1997-2012): Expecting to jump from full-time work straight to retirement around age 55
However, what people want and what is realistic don’t always match up! A Transamerica survey found that 53% of workers expect to work past age 65, and 13% don’t plan to retire at all.
Social Security: A Major Factor in Your Retirement Decision
The Social Security Administration (SSA) plays a huge role in when most Americans decide to stop working. Let’s break down some important Social Security considerations
Full Retirement Age
- Born 1943-1959: Full retirement age is 66
- Born 1960 or later: Full retirement age is 67
At your full retirement age, you’ll get 100% of your Social Security benefit. But you have options:
Early Retirement (Age 62)
You can start collecting Social Security as early as 62, but your benefits will be reduced to about 70% of your full amount. And that reduction is usually permanent! Ouch.
Delayed Retirement (Up to Age 70)
Wait until 70 to claim benefits and you’ll get the maximum amount – up to 124% of your full benefit. That’s an increase of about 8% per year you wait after full retirement age.
How Your Work History Affects Your Benefits
The SSA calculates your retirement benefits based on your highest 35 years of earnings. This creates some interesting scenarios:
-
If you stop working before accumulating 35 years of earnings: The SSA will use zeros for years without earnings, which can significantly reduce your benefit amount.
-
If you have 35 years but some are low-earning years: Continuing to work could replace those low-earning years with higher-earning ones, increasing your benefit.
-
If you work between 62 and full retirement age: You can receive reduced benefits while still working, but be aware of earning limits that might temporarily reduce your benefits.
-
If you work after full retirement age: You can work and get full retirement benefits no matter how much you earn! Plus, you’re still building up delayed retirement credits if you haven’t claimed yet.
What Age is “Too Old” to Work?
This is the million-dollar question, isn’t it? According to the Transamerica survey:
- When asked what age is “too old to work,” more than half of respondents said it depends on the person.
- Of those who did give a specific age, the median was 75.
- Interestingly, when asked about the age someone is considered “old,” the median response was 70.
So apparently, it’s okay to be “old” and still working, at least for about five years!
Different generations have different perspectives on this:
- Baby Boomers: Consider 75 to be “old” and also too old to work
- Gen X: Consider 70 to be “old” but 75 too old to work
- Millennials: Consider 65 to be “old” and 70 too old to work
Important Retirement Age Milestones to Consider
Deciding when to stop working involves understanding several key age milestones:
| Age | Milestone |
|---|---|
| 50 | Can begin making catch-up contributions to retirement plans and IRAs |
| 55 | Can withdraw from retirement plans without 10% IRS penalty if you leave your job |
| 59½ | Can withdraw from retirement plans without penalty regardless of work status |
| 62 | Earliest age to collect Social Security (reduced benefits) |
| 64-65 | Medicare enrollment opens at 64, coverage begins at 65 |
| 66 | Full retirement age for those born 1943-1959 |
| 67 | Full retirement age for those born 1960 or later |
| 70 | Maximum Social Security benefit if you start collecting now |
| 73 | Must start taking required minimum distributions (RMDs) from retirement plans |
Health and Longevity Considerations
Your health and family history of longevity are MAJOR factors in deciding when to stop working. Consider these facts:
- The median expected lifespan reported across Boomers, Gen-Xers, and Millennials was age 90
- If you work until 75, you might still have a 15-year retirement ahead of you
- Recent research found that more than three-fourths (77%) of people age 75-79 report no health-based limitations in their ability to work or complete housework
The Truth About Older Workers
There are mixed perceptions about older workers in the workplace:
Positive perceptions (84% of respondents reported these):
- Bring more knowledge, wisdom and life experience
- Are more responsible, reliable and dependable
- Valuable for training and mentoring
Negative perceptions (54% reported these):
- Have higher healthcare costs
- Command higher wages
- Less open to learning new ideas
Unsurprisingly, Boomers were more likely to have positive perceptions of older workers compared to Gen-Xers and Millennials. I wonder why!
Finding YOUR Perfect Retirement Age
So when should YOU stop working? That depends on several personal factors:
- Financial readiness: How much will you have saved at different potential retirement ages?
- Monthly income needs: What lifestyle do you want in retirement and how much will it cost?
- Continued income plans: Will you phase into retirement with part-time work?
- Family longevity: How long might you live based on your family history?
- Health status: Are you physically and mentally able to continue working?
- Job satisfaction: Do you enjoy your work or is it causing stress and burnout?
How to Avoid Outliving Your Money
No matter when you retire, here are some strategies to make your money last:
- Save more now: Contribute the maximum allowed to your employer’s retirement plan and IRAs. If you’re 50+, take advantage of catch-up contributions.
- Delay Social Security: Remember that 8% per year increase if you wait past full retirement age!
- Plan your spending carefully: Many financial advisors recommend withdrawing no more than 4-5% of your nest egg annually (adjusted for inflation).
Phased Retirement: The New Trend
Traditional retirement isn’t the only option anymore! Many workers are considering a phased approach:
- Reducing hours gradually
- Switching to consulting or contract work
- Taking on mentorship roles
- Exploring encore careers in fields you’re passionate about
This approach can provide continued income, mental stimulation, and social connection while easing into full retirement.
My Personal Take on Retirement Timing
I’ve been thinking about this a lot lately. My parents both retired at different ages – mom at 62 because she was burned out, dad at 68 because he loved his job. And they both seem happy with their choices!
For me, I’m leaning toward a phased approach in my early 60s. I want to have enough time and health to travel and enjoy hobbies, but I also want the mental stimulation and purpose that work provides. Plus, those extra years of saving could make a BIG difference in my retirement lifestyle.
The beautiful thing is there’s no “right” answer – just what’s right for you.
Final Thoughts
So at what age do you stop working? As we’ve seen, there’s no one-size-fits-all answer. It depends on your finances, health, job satisfaction, and personal goals.
The good news is we’re living longer, healthier lives than previous generations, which gives us more options. Whether you dream of early retirement at 55 or plan to work well into your 70s, the key is making an informed decision based on your unique circumstances.
What’s your retirement plan? Are you aiming for early retirement or planning to work as long as possible? I’d love to hear your thoughts in the comments!
Remember: It’s never too early to start planning for retirement, but it can definitely be too late. Take some time today to think about your ideal retirement age and what steps you need to take to get there.
Gen Xers and Millennials
Desire a phased approach, gradually decreasing their hours—starting around ages 64 and 59, respectively.
The Silent Generation
Traditional retirement was much more common for people currently over age 75.
Typically plan to immediately go from working full time to retirement— around age 68.
At What Age Should You STOP Working Out? (Here’s The Truth)
FAQ
At what age do most people stop working?
Most people in the U. S. stop working around age 62, although expectations for retirement age vary, with many planning to work longer.
Can you still work at 70 years old?
Yes, it is possible to get hired at retirement age. Many employers value the experience, skills, and work ethic that older workers bring. Here are some factors to consider:
At what age should one stop working?
Many people think that age 65 is a good time to retire, but Americans have different ideas about when to stop working.
Is it better to take Social Security at 62 or 67 or 70?
Claiming Social Security at age 62 results in a reduced monthly benefit, while waiting until your full retirement age (FRA), usually 67, provides 100% of your earned benefit. Delaying benefits until age 70 provides the largest possible monthly benefit by earning delayed retirement credits, which increase your payment by about 8% for each year you wait past your FRA. The best choice depends on your health, other retirement income, and desire to continue working.
Can I stop working before my full retirement age?
You can stop working before your full retirement age and receive reduced benefits. The earliest age you can start receiving retirement benefits is age 62. If you file for benefits when you reach full retirement age, you will receive full retirement benefits. If you choose to work beyond your full retirement age, you have 2 options:
When do people stop working?
The goal of a recent poll from Natixis Investment Managers was to find out when most Americans plan to retire. The average age is 62, the research found. However, it turns out when people to hang up their hats varies by generation. The youngest cohort, Generation Y — ages 25 to 40 — plans to retire at an average age of 59.
How old is too old to work?
As you might expect, workers’ views on being old depend a lot on their own age, as follows: 75 is the median age reported by boomers as “old,” the same age they consider people to be too old to work. 70 is the median age reported by Gen-Xers as “old,” while 75 is the median age they consider people to be too old to work.
What if I work beyond my retirement age?
You have two choices if you want to work past your full retirement age: You can work and get full retirement benefits no matter how much you earn; or You can delay getting retirement benefits and earn credits that increase your benefit amount.
What happens if you stop working after 35 years?
Even if you have 35 years of earnings when you stop working, some of those years may be low-earning years. When you file for retirement benefits, those years are averaged into your calculation, creating a lower benefit. However, if you had continued to work, your low earning years are replaced with your high earning years.
What happens if I stop working before I start receiving benefits?
If you stop work before you start receiving benefits and you have less than 35 years of earnings, your benefit amount is affected. We use a zero for each year without earnings when we calculate the amount of retirement benefits you are due. Years with no earnings reduce your retirement benefit amount.