Every time you hear the term “retirement,” what is the first thing that comes to your mind? Do you consider it the time when you close one chapter of your life to open another?
For most people, retirement is the best days of their lives. However, those who are not lucky enough find this stage disappointing.
Retirement has two opposite ends of the spectrum—it can be both the best and worst days of your entire life.
What Is the Retirement Age?
Retirement age marks the end of the professional life of a person. This life transformation comes naturally at the age established by the government or employer, unforeseen illnesses, or disabilities or can happen voluntarily when a person feels like he or she has done enough and needs to take a break.
In general, people retire at the age when they are eligible for their pension benefits that can help them survive in terms of finances.
The retirement age across the world ranges from 50 to 70 years old, so it is important for people to create their plan for retirement while they still have a job instead of doing so when retirement is getting closer. This way, you will be able to plan your life after retirement and work according to it.
It can be hard to create a retirement plan if you don’t know the age when you will retire. The retirement age is among the most critical factors to help you decide how you will invest.
Your retirement age is one thing you have to start thinking about as soon as possible for you to make the most out of your retirement benefits.
Your retirement age, among many other things, will determine the number of years you will have as a full-time employee. This also gives a good estimate of how many years you have to live during your retirement.
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The difference between your current age and your planned retirement age is the number of years you need to complete all of your plans for retirement. When you start earlier, you will be much better off. Starting early allows you to invest in the most lucrative investments.
Waiting too long will leave you with fewer options, so you might end up with low-risks investments with lower returns.
What Is the Retirement Age for Social Security?
The Social Security Administration determines your full retirement age based on the year of your birth.
If your year of birth falls between 1943 and 1954, 66 will be your full retirement age. Those who were born in the year 1960 or later will have a full retirement age at 67.
Meanwhile, those born between the years 1955 and 1959 will have their full retirement age falling somewhere in the middle.
If you wait until you reached your full retirement age when you can take Social Security for the first time, you will be able to get all of the benefit payments that you are allowed to collect.
Determine Your Social Security Full Retirement Age
Since you can maximize your payments in Social Security if you wait until you reached your full retirement age, it is important that you know when you can start to claim benefits.
Even though 65 used to be the Social Security full retirement age, it has been increased since then because of the changes in life expectancies.
Take a look below to know your full retirement age according to your birth year:
- 1960 – 67 years
- 1959 – 66 years and 10 months
- 1958 – 66 years and 8 months
- 1957 – 66 years and 6 months
- 1956 – 66 years and 4 months
- 1955 – 66 years and 2 months
- 1943–1954 – 66 years
Since Social Security first started to pay benefits in 1940, men’s average life expectancy reaching 65 years old has a seven-year increase, reaching as much as 84.3 years old. It also has a seven-year increase for women at 86.6 years old.
If your birth year falls in 1960 or later, keep in mind that your full retirement age can still change in the future if there is a continuous increase in life expectancies across the board.
Also, the rules on claiming benefits late or early might also change in time, so you may want to stay updated with changes in Social Security that may affect your payments.
Should You Retire Before the Retirement Age?
If you are thinking of retiring before the retirement age, it is important to consider that while it can save you from the stress of working, retiring early also means you will have to give up on the extra money you will earn that can help you enjoy a more comfortable retirement.
To make your decision easier, there are a few signs that will tell you that you can retire before retirement age:
1. You have paid off your debts.
If you already paid off your mortgage in full and there are no existing loans, large balances in credit cards, credit lines, or any other debts under your name, you don’t need to worry about large payments once you retire.
This way, you can enjoy your life after work and use your retirement income and savings freely during emergencies instead of having to pay off pricey bills.
2. There is no early withdrawal penalty to your retirement plan.
If there is a 457 plan in your retirement savings that doesn’t have an early withdrawal penalty, you won’t have to worry about any penalty if you retire early and withdraw from the plan.
Just remember that your withdrawals still require you to pay income tax.
3. Your savings already went beyond your goals for retirement.
Probably one of the best signs that you can retire before retirement age is if your investments already met or exceeded the amount that you hoped to save up for your retirement.
Take note, however, that if you quit your job several years prior to what you planned to, the savings you have should be enough to cover the extra years of retirement.
4. You’ve got your healthcare covered.
Since healthcare can be expensive, it pays a lot to have a good plan in place for covering all health expenses. A sufficient healthcare coverage means that you are set on the right track to retiring before your retirement age.
5. You have a new retirement project or plan.
A part-time employment plan, hobby, travel, or outline of your day-to-day routine will help you retire earlier.
6. You can live on your budget for retirement.
If you have no trouble living off your retirement budget, this is another sign that retiring early won’t cause you any problems.
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How to Retire Earlier Than the Retirement Age by Investing in Real Estate
Real estate investment is a tricky business, but once done right, you can enjoy great rewards as well as your retirement account. It doesn’t matter if you already got a few properties or you are just starting to invest in real estate because this can help you retire earlier than the retirement age.
There are a few tips to remember so that you can retire earlier than your retirement age through real estate investment:
1. Be financially independent.
Not having debts to burden you is one of the first steps to invest in real estate. A lower debt will allow you to invest in more rental properties.
2. Monitor your income.
If you want to retire early by investing in real estate, you need to monitor your income. Make sure that all of your bases are covered to live comfortably before starting to buy any property.
3. Know your numbers.
In case you already got some rental properties under your name, make sure you keep track of how much you earn from them. Consider other expenses such as upgrades and emergency repairs.
4. Determine how many properties can help you maintain all of your expenses.
Knowing the right number of properties you need to cover all of your expenses is important. You have to consider everything necessary in your life such as health, bills, daily care, livelihood, family, and spouse.
5. Improve your properties.
You will never be able to retire early if your properties don’t bring in any money. To make it happen, you need to improve and reinvest in them so that you can be sure that they will give you a long-term flow of income.
6. Be wise in choosing your properties.
Real estate investment requires you to be wise in choosing your properties. Don’t expect to retire early if you only flip houses. Choose properties where people will want to move to. Go for an area with a good neighborhood, good value of properties, and decent schools. The property must be in a place that lets you sell easily if the need arises.
7. Screen your tenants.
The last but definitely not the least step to retire before retirement age is to screen tenants to find the most reliable ones and set up your own rent requirements.
Implement a fair rental fee so you won’t shun away decent tenants. Take note that your tenants can either make or break your real estate investment. After all, real estate is all about steady and long-term income.
How to Retire Earlier Than the Retirement Age Starting Businesses
Starting your own business gives you the edge to achieve financial independence that will let you retire earlier than the retirement age.
Entrepreneurs can enjoy the perks of being their own boss, and at the same time, they don’t need to be bogged down with the set retirement age as implemented by employers or governments.
Before you start a business, however, make sure that you have a good plan in place to ensure that your business will be a success. Take note of these tips in starting your own business:
- Know yourself, your level of motivation, how much money you can risk, and what you can willingly do to become successful.
- Pick the right business that suits you.
- Ensure that there is a market for the product you plan to sell or service you want to offer.
- Look into your competitors.
- Create a plan to succeed.
- Determine the operational needs of your business.
- Avoid procrastination.
- Start small before you go all out.
- Avoid fixating on mistakes or getting demoralized because of them.
What Is the Medicare Retirement Age?
Benefits in Medicare start the moment you reach 65 years old, unless you are qualified because of disability. You will be enrolled automatically at 65 years of age if you are already receiving benefits from the Railroad Retirement Board or Social Security.
When you retire at 62 years old, you can continue getting medical insurance coverage from your employer or buy coverage from a private insurance company until you reach 65 years old.
As you wait for Medicare enrollment eligibility, you can get in touch with the State Health Insurance Assistance Program to know your options.
Is There an Early Retirement Age?
Early retirement is commonly defined as any age before 65 years old when you are already qualified for Medicare benefits. Right now, men retire at an average age of 64 years old. As for women, 62 is the average age for retirement.
Retiring prior to the traditional age of 65 years old can feel exciting and can even give you things you can look forward to.
Whether you want to go travel, start new hobbies, or open another chapter in your life, a retirement plan is necessary.
Before you retire early though, you have to ensure that you have enough assets that will give you an acceptable income level throughout your life’s remaining years so you can be financially prepared to live even if you no longer receive a paycheck.
In the United States, the average lifespan is below 79 years. If you will retire at 55 years old, it means you have to save up an income worth 24 years, and people who live beyond 79 years old will need a bigger nest egg.
The Bottom Line
Retirement age is something that you need to know so that you can plan your retirement accordingly and make sure that this chapter will be the best and not the worst days of your life.