What to Know Before You Choose Your Retirement Age

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Updated September 30, 2020

Your retirement age determines when and how you can access your retirement money. Retirement age rules vary from plan to plan and from country to country.

Your 401(k) plan, for example, may define retirement age differently than your pension plan or Social Security. Here are the things you need to know before you choose your retirement age.

Retirement Age for Social Security

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The earliest age you can collect your Social Security retirement benefits is age 62—but just because you can collect at this age doesn't mean you should. You'll get a larger monthly amount by claiming at a later age. In addition, if you take Social Security at 62, or any time before full retirement age (which varies by your date of birth), and you continue to work and earn an amount in excess of the earnings limit, your Social Security benefits will be reduced. Don't start collecting your Social Security benefits until you understand how your start age affects your benefits. Married couples in particular need to do careful planning as they can often get an increased survivor benefit when they coordinate when and how they each begin their benefits.

Age You Can Begin Withdrawals From a 401(k) Plan

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You may be eligible to withdraw money from your 401(k) plan as early as age 55. Different rules apply to distributions you take at different ages. Key 401(k) retirement ages to be aware of are 55, 59 1/2, and age 70 1/2. If you are not yet age 55 and you need to access your 401(k) money, you might be able to use a 401(k) loan, or take a hardship withdrawal, however, be cautious of early withdrawals. There is creditor protection provided to money in a 401(k) plan, so you need to think twice before you cash out of your plan.

Average Retirement Age in the United States

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The U.S. Census Bureau tells us the average retirement age in the United States is 62, and the average length of retirement is 18 years. Interestingly enough, Social Security defines 62 as your early retirement age; begin benefits at this age and you will receive a reduced Social Security benefit. Those who have pensions, a large amount of savings and the ability to maintain a budget, will likely be in good shape if they choose to retire at age 62 or earlier. Those who don't have those things need to consider working past the average retirement age.

Early Retirement

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Many Americans think of age 55 or earlier as an early retirement age. If you can save enough early on in life, early retirement is achievable. Early retirement is most common for those who are either extreme savers or who started work early in the military or in some form of civil service (which means they are eligible for a pension at a young age). For those without pensions, rather than retiring early, consider finding work you love to do. Many people use early retirement from one job as an opportunity to find a second career that they truly enjoy.

Effective vs. Official Retirement Ages by Country

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The official age of retirement and the effective age of retirement are two different things, and they vary from country to country. The official age of retirement would be the age at which government retirement benefits kick in. The effective age would be the age people choose to retire, even if benefits are not yet available.

What Rules Apply at Which Age?

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This retirement age timeline tells you what retirement planning events are triggered at specific ages, and what you need to do as you near each age. The key ages are 55, 59 1/2, 62, 65, 70, 70 1/2, and 75. Before you choose your retirement age you will need to become familiar with the rules. There are action items you'll want to take as you near each age.