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How to Pick the Optimal Retirement Age

How to Pick the Optimal Retirement Age

The classic retirement age continues to resonate with working Americans. A recent Gallup survey found that workers expect to retire at an average age of 65, down slightly from 66 in 2014.

If you look beyond the average, slightly more Americans are interested in retiring after age 65 than before it. Over a third (37 percent) of workers are planning to retire at age 66 or older, up from 14 percent in 1995, the Gallup poll of 652 working adults and 363 retirees found. Another third (32 percent) of Americans say they are aiming to retire before age 65, down significantly from 49 percent in 1995. About a quarter (24 percent) of workers are hoping to retire at exactly age 65, a proportion that has remained consistent for the past decade.

Other surveys have seen a similar change in retirement expectations. An Employee Benefit Research Institute survey of 1,003 workers and 1,001 retirees found that the proportion of adults who expect to retire after age 65 has climbed from 11 percent in 1991 to 36 percent in 2015. Another 10 percent of workers say they never plan to retire.

But few retirees actually stay on the job past age 65. Retirees left their jobs at an average age of 60, according to the Gallup survey. And the majority of current retirees (67 percent) say they retired before age 65. Only 18 percent of retirees left the workforce after age 65 and 9 percent retired at age 65. The EBRI survey found that just 14 percent of retirees stayed on the job past age 65.

Here are some of the factors that play a role in when people retire:

Evaluate your finances. The size of your nest egg plays a big role in when you can financially afford to retire. Withdrawals from your savings, combined with your Social Security and pension payments, need to provide enough income to cover your expenses. Those who know they haven't saved enough to pay their bills often plan to delay retirement past age 65 because they need the income. "Concerns about affording retirement, especially because of the recession, could persuade Americans to wait to retire, or to plan to retire later," writes Rebecca Riffkin, a Gallup analyst, in the report. "The difference between the age when retirees report retiring and when nonretirees expect to retire may be a generation gap, with current workers expecting to live longer and planning to continue working later in their lives."

Medicare eligibility. Workers qualify for Medicare coverage at age 65. Enrolling in this government health insurance program gives you the freedom to walk away from a job that you stayed at largely for the employer-sponsored health insurance. Retirees who sign up for Medicare qualify for health coverage at reasonable rates, regardless of any pre-existing health conditions.

Social Security income. Signing up for Social Security can replace some of the income you earned while working. However, benefit payouts are reduced if you sign up for payments at age 65. The age workers qualify for full benefits is 66 for most baby boomers and 67 for everyone born in 1960 or later. You can increase your monthly Social Security payments by delaying claiming them up until age 70.

Retirement plans. If you are doing work you enjoy, it can be attractive to stay on the job. Retirement gives you a surplus of free time, which can be wonderful if you have hobbies and volunteer work you want to pursue. But retirement without any activities and a social network that isn't tied to your job can be lonely and isolating.

You may not get to choose your retirement date. When you retire is not always within your control. The EBRI survey found that half of retirees left the workforce earlier than planned, typically due to health problems, job loss or to care for a spouse or other family member. Retirement isn't always a date you get to pick, but a situation you need to cope with.

Emily Brandon is the senior editor for Retirement at U.S. News. You can contact her on Twitter @aiming2retire, circle her on Google+ or email her at ebrandon@usnews.com.



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