Average Retirement Age In The United States

Is retiring at the average age a smart move?

Man watching wife dance as she gets near retirement age.
Working past the average retirement age may give you more freedom in retirement. Image Source

The U.S. Census Bureau data shows that the average retirement age in the United States is about age 63. Age 63, however, would be considered an early retirement age as far as how your Social Security and Medicare benefits work.

The U.S. Census Bureau data shows that the average length of retirement is 18 years. 

Retirement Age Varies by State

Average retirement age varies by state. In states with a higher cost of living, such as the New England area, the average retirement age is higher.

People work longer because they have to in order to afford retirement in their state. In states with high unemployment, the average retirement age is lower. People who can't find work are forced into retirement earlier than they desired. One of the areas with the earliest retirement age is the Appalachian region.

Social Security and Medicare Retirement Age

Social Security uses the term full retirement age in place of what most of us would think of as "average" or normal retirement age. Full retirement age, abbreviated as "FRA," is the age at which you receive your full amount of Social Security benefits. Your year of birth determines what your FRA is. Anyone turning age 62 in 2017 or beyond will have a FRA that ranges from age 66 to age 67. If you claim benefits before FRA, you receive a reduced benefit, and if you claim benefits after reaching FRA, you receive an increased benefit.

Medicare benefits begin at age 65.

If you retire before age 65, you will need to have a plan in place to pay for private health insurance until you are eligible to go on Medicare.

If You Are Near Retirement

Regardless of your age, if you are within five years of when you think you'll want to retire, you should start planning now. Build up cash reserves, develop projections based on various ages to start Social Security, and figure out how much you'll need to spend each year.

Don't wait until the year you want to retire to start this planning. The more prepared you are, the better off you'll be if unemployment forces you into retirement earlier than when you had planned.

If you want to retire early - and by early I mean any time before the average retirement age - you'll need to plan for many more years in retirement than the average person will have. You could spend 25, 30, or even 40 years in retirement. There are several things to consider before you retire too early, such as how you are going to pay for health care costs, your longevity (how long you may live), and what you'll do with your time.

You'll also want to evaluate when to start Social Security, and how to begin consolidating retirement accounts to make things easier to manage.

Easing Into Retirement

Retirement represents a big change in lifestyle. In my experience, many people are best off with a gradual transition from full-time work to an eventual full-time retirement. Doctors and other professionals such as accountants or attorneys often have the ability to reduce their work schedule to four days a week, then three days a week, and so on. If you can arrange this, it allows you to continue to use the skills you have acquired and work many years past the average retirement age, but at a slower pace.

If you have not saved enough, extending your retirement age from age 62 to an age 65 retirement can have a big impact on the financial success of your retirement plan. One of the reasons is that Medicare starts at 65 and prior to that paying for health care on your own can be expensive. Also, by working longer, you have three extra years of contributing to savings instead of withdrawing from savings. 

Working Longer - Often a Smart Move

For those who plan on working past full retirement age, think carefully about when you will start your Social Security benefits. Some people think they will double dip and start Social Security early while also continuing to work - but if you begin benefits early, you may be subject to the Social Security earnings limit - which will require you to pay some benefits back if you make too much money.

As we are living longer than ever, many people ought to consider putting off retirement until age 70. Putting off retirement until later can mean less worry once you get there. Then you can relax and truly enjoy your retirement years.