Working Americans nearing retirement may well wonder if there’s a perfect retirement age, and now that question may finally be answered.
According to a new survey by Empower, on average, Americans believe that saving for retirement should start no later than age 27, be debt-free by age 41, and retire by age 58. Empower said there’s no "set age" to retire, but casts a large shadow over the age 58 retirement number, suggesting that most Americans haven’t accumulated enough cash for an early retirement.
For example, the study noted that nearly half of the U.S. career professionals surveyed (45 percent) wish they had started saving earlier. That’s particularly the case when properly preparing for significant life events, such as buying a home, launching a new business, graduating, and then paying for college.
Additionally, 41 percent of survey respondents wished they’d stacked a large emergency savings fund, while 80 percent say they should have set aside more money specifically to navigate financial emergencies. Additionally, 25 percent of respondents report that they underestimated the costs of major life events.
A Perfect Retirement Age? Maybe Not, Experts Say
Finance and retirement gurus say the only retirement age that matters is the one that works best for you. There are, however, some caveats and key takeaways to the age 58 retirement issue.
“The ‘best’ age to retire is going to be different for every person and every family,” Stephen Landersman, president of Unifi Advisors, LLC in Harrisburg, Pennsylvania, told NTD in an email. "The sheer number of variables involved makes each situation unique."
For an employee who is eligible for full pension benefits at 58, it may not be too early, Landersman said. “We need to consider that the group who responded to the survey were likely retirement plan participants and more likely to have started investing for their own retirement,” he noted.
A ‘Phase Out’ May Be More Realistic
When you love your job and career, it's challenging to want to stop working. "Retirement" for people who enjoy their careers may mean slowing down or doing something else still tangentially related to their pre-retirement role,” Amy Zamikovsky, senior financial adviser at Transform Wealth in Houston, Texas, told NTD via email.
Zamikovsky said she has seen the "phase out" strategy be a successful way for clients to transition away from an "earn and save" mindset to an "earn and spend" mindset, and then eventually to a "spending only" mindset. “Some clients are so accustomed to earning and saving that it takes them a few years to adjust to the fact that their income has decreased significantly, and it is still okay to spend money,” she said. “As long as someone is still bringing in any amount of earned income, even during 'retirement,' it’s still a good idea to contribute to a Roth IRA or a traditional IRA, including the catch-up contribution.”
Focus on These Financial Issues When Planning for Retirement
It’s generally not a good idea to focus on a specific retirement age, especially at the expense of a disciplined savings plan.
“There are plenty of factors that contribute to an individual's ideal retirement age,” Zamikovsky said. Those primary factors include the following priorities, she noted.
- The amount of liquid wealth one currently has.
- The annual amount one intends to spend during retirement (often referred to as a client's desired retirement lifestyle).
- The amount of income one expects to receive during retirement from annuities, pensions, or Social Security
- The number of years the client's wealth needs to last.
As a conservative planner, Zamikovsky said she feels most comfortable using age 100-105 as a lifespan guide, unless the client has an unusual personal and family health history.
“I frequently hear about my clients' elders living beyond age 100, which leads me to one of the most important yet often overlooked areas of a client's financial plan: the cost of long-term care.”
If a retiree doesn’t qualify for a long-term care insurance policy, they must have long-term care funds set aside for this purpose. “U.S. health statistics tell us that about 70 percent of people turning age 65 today will need some form of long-term care services during their lifetime,” she said. "Of those, 24 percent will need more than two years of care, and 15 percent will spend more than five years in care.”
Depending on the type and length of required care, long-term care expenses can easily exceed $200,000 in today's dollars. “If this isn't adequately prepared for, it can be catastrophic to the finances of an entire family,” Zamikovsky added.
The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.