There is often confusion among older adults about the retirement age and what constitutes early retirement. Some people plan to retire at a certain age, only to discover that they are not yet eligible to receive certain benefits.

What is retirement age? 

Retirement age is simply the age at which you retire from working. There are several factors contributing to when a person might choose to retire, including:  

  • Health
  • Personal wealth 
  • Forced retirement initiated by the employer 
  • Financial difficulties 
  • Eligibility for social security benefits or Medicare 
  • To care for a spouse or family member

Many reasons determine when and why a person retires, and other issues like personal spending habits and major life events can also have a hand in when a person decides to retire. However, you may have heard of full retirement age (FRA), Social Security retirement age (SSRA), and early retirement age (ERA).  

Let’s discuss the different retirement ages and the rules for qualifying for some key benefits. 

The Social Security Retirement Age 

According to the Social Security Administration (SSA), your full retirement age (FRA) is when you can begin to receive full retirement benefits from the Social Security Administration. There is often confusion about a person’s retirement age since Medicare eligibility occurs at age 65.  

However, the SSA defines retirement age differently. Many people don’t realize that this determination is based on a retirement age chart. For example, a person born between 1943 and 1954 becomes eligible for full SSA benefits at age 66. But the retirement age for a person born after 1960 is 67. 

Can you retire early and still receive benefits from the SSA? Let’s examine what happens if you take early retirement. 

Early Retirement Age  

Many people contemplate early retirement and consider leaving the workforce as early as 62. It is possible to begin receiving retirement benefits from the SSA at 62. However, those benefits will be reduced. In fact, the further away from your full eligibility age you retire, the more significant your reduction in benefits will be. For example, if you were to retire at 62 but weren’t eligible based on your birth year for SSA benefits for another five years, you would see a 30 percent reduction in benefits.  

In addition, there will also be a gap in time between early retirement and Medicare eligibility at age 65. And many people don’t realize how much their employers subsidize their healthcare plans. In most cases, early retirement means utilizing COBRA or paying significantly higher out-of-pocket healthcare costs. 

What is my retirement age? 

Focusing on the retirement age of 65 for Medicare eligibility or 66 to 67 for SSA benefits can be shortsighted. Before 1940, when the retirement age was 65, seniors could expect about a dozen years of retirement on average. But life expectancy has increased dramatically in the decades since, meaning seniors live for much longer after retirement. And the costs associated with that extended lifespan have also increased. 

As a result, many people are delaying retirement even beyond 67. And the SSA will increase the benefits of those who delay their retirement beyond 67, up to the age of 70. Delaying retirement can also give people extra time to add to their savings, wait for stock market corrections to boost their assets, or maximize work pensions.  

But even the best-laid plans must sometimes change, and health issues for you or a family member can affect when you retire. Because you cannot predict that everything will go according to plan, it’s vital to save and invest as much as possible to ensure that you have a retirement safety net. 

The average age of retirement in the US 

You might be surprised to learn that despite incentives to continue working until between 66 and 70, many people retire much sooner. While some are delaying retirement due to financial constraints, not everyone is. And retiring too soon could become a losing gamble. With many living several decades beyond retirement and into their 80s and 90s, the reduction in benefits can take a toll over time. In addition, many people simply don’t set enough money aside to carry them into the nonagenarian status and even beyond.  

According to recent data, the current average retirement age in the US is 61. Many people may have been investing in an employer-sponsored 401(k) or IRA savings account that they can draw on, but not everyone has this cushion. And at 61, a person cannot even file for SSA benefits. As mentioned above, filing for SSA benefits early can result in reduced benefits for the rest of your life, creating an income shortfall. That, coupled with the additional healthcare expenses, can plunge the early retiree into financial difficulties very quickly. 

When is the right time to retire? 

When you retire is a personal decision. And there may be extenuating circumstances that cause your plans to change. However, planning to retire a few years later can make a significant difference in your long-term financial stability and health. Consider planning for retirement at the age of 67 or later to maximize your savings and benefits, helping ensure a better quality of life in your golden years.