Key Takeaways

• Retirement age is personal and depends on your finances, health, and lifestyle goals.
• Key ages matter, like 59.5 for penalty-free withdrawals and 70 for max Social Security benefits.
• Retirement is more than money—consider work satisfaction, lifestyle, and phased retirement options.

The question "What age should I retire?" may seem simple. However, when one considers their personal definition of retirement and their unique set of personal circumstances it can actually become quite a complex and deep topic.  

To help you figure out your optimal retirement age, it’s helpful to start with defining what retirement means and how this definition has evolved over time.  We’ll then explore the five modern definitions of retirement so you can uncover which one aligns with you most.

How History Has Affected What Age People Retire

Longevity Drives the Need to Retire

Historically, the concept of retirement has been shaped by both economic and social changes. Before the 18th century, life expectancy was relatively low, ranging between 26 and 40 years, which meant most people worked until they physically could no longer contribute. As the world industrialized and life expectancies increased, people were beginning to reach an age where physical impairments became obstacles to working.  Older workers were slowing down factory lines, missing work, and occupying jobs that more youthful workers needed.  

Conditions worsened during the Great Depression, as unemployment of 3.2% in 1929 steadily rose to a high of 24.9% by 1933.  President Franklin D. Roosevelt proposed the Social Security Act of 1935 as part of his Great New Deal program to encourage older workers to retire.  

Defined benefit pension plans gained traction following World War II's boom years as companies offered pensions to attract and retain talent.  In 1965, Medicare was signed into law to provide health care coverage for those 65 and over. 

Additionally, Americans became wealthier during the sustained period of economic growth following World War II, and retirement was viewed as both desirable and affordable.  Labor force participation of people aged 65 or more steadily declined and bottomed in 1985 at 10%.

Advancements in Medicine Shape a New Trend

Since 1985, however, the labor force participation rate among those aged 65 and over has steadily increased.   This new trend has emerged as a result of many factors.  First, today's 65 year old is healthier and has greater expected longevity due to tremendous advancements in health care and medicine.  

Living longer is fantastic, but it also means potentially being retired for longer.  The expectation of being retired longer means greater financial resources are needed, as are plans for spending the additional time in a rewarding and enjoyable way.  

Second, most jobs today in the United States require less manual labor, enabling workers to remain productive much longer than in the past.  

In fact, there is a positive correlation between retirement age and educational attainment since education generally opens the doors to greater job quality and satisfaction.  

Third, defined benefit pension plans have steadily given way to defined contribution plans (i.e., 401k), reducing the amount of "guaranteed" lifetime income a retiree can bank on in retirement.  

Psychologically and behaviorally speaking, most individuals find spending down savings from an investment portfolio more difficult and less assuring than receiving a set amount of income for life, whether this apprehension is warranted or not.  

The Role of Social Security and Medicare in Retirement

Understanding Social Security eligibility age and Medicare eligibility age is essential when planning for retirement and these numbers have shifted over time. Social Security benefits can significantly supplement retirement income, and being able to access Medicare at age 65 provides essential healthcare coverage. These milestones play a critical role in determining the best time to retire, as we’ll touch on below.

The max social security benefit is reached at  age 70 providing a substantial incentive for delaying Social Security claims until the maximum age, ensuring higher monthly benefits. However, this requires careful financial planning to ensure funds last throughout retirement, especially for those planning on retiring earlier than 70.

What is Retirement Today?

The landscape of retirement has changed dramatically in recent decades and thus, the definition of retirement has changed. With longer life expectancies and advancements in healthcare, many individuals are retiring later, which can bring both opportunities and challenges. 

So what is retirement today, in 2025 and beyond? Most people think of retirement along some combination of the following:

1.  A Culturally Acceptable Number  

Unlike the past when retirees were anchored by defined benefits pensions, today's retirement age is more flexible. 

So what age can you retire, based on most common benefit systems today?

Today's anchor points are 59.5, 62, 65, 67, 70, and 73.  Here’s why:

• At age 59.5, retirees can begin withdrawing funds from their retirement accounts penalty-free.  
• At age 62, this is the Social Security eligibility age where covered retirees become eligible to claim Social Security benefits, albeit a reduced portion.  
• At age 65, retirees are eligible for Medicare. 
•  At age 67, those born in 1960 or later reach full retirement age (FRA) under Social Security, allowing them to claim a 100% of their Social Security benefit.  
• After age 70, there is no further benefit to deferring claiming Social Security.  
• At age 73, a retiree (born 1951-1959) must begin making required minimum distributions on their qualified retirement accounts.  For retirees born 1960 and later, the required minimum distribution age is 75.

There’s a reason that many people choose to retire at or around these anchor points. They are the points at which they can either retire early or maximize their benefits.

2. A Financial Number

The financial feasibility of retirement is a major consideration when determining the optimal retirement age. This "retirement number" will be different depending upon how one wants to live in retirement and the length of time one wants to meet essential and discretionary expenses.  

Other inputs to determining this number include other assets/resources, risk profile, asset allocation, portfolio construction, social security claiming, tax management, withdrawal order sequencing, and spending flexibility.  

While it’s not easy to juggle all of these factors, fortunately, this can all be modeled and sensitivity/probability tested using Monte Carlo and/or historical simulation analysis to help you get closer to your optimal retirement number and corresponding age.  

It is here that most individuals retain the services of a financial advisor or a retirement planning specialist to guide them in their retirement planning decisions.  Retirement planning is essential, but all advice and retirement planning are not created equal, so please read the following article to learn more:  Steps That Should Occur in a Proper Retirement Planning Process.

3. Dis-utility of Work

Does work bring you joy and provide you with meaning?  

Work can offer both financial security and emotional fulfillment.  Some people find a strong identity in their work and enjoy the mental challenge work can bring.  Some people also enjoy the relationships, and social opportunities work provides.  Deciding to retire by choice means that you find more potential utility in retirement than continuing to work. We also find that some people who choose to retire early may find it challenging to adjust to their new retirement lifestyle from a mental standpoint. To learn more, read 7 ways to mentally prepare for retirement. 

4.  A Total Cessation of Work

For some, retirement means fully stepping away from the workforce. This total cessation of work can provide a sense of freedom, as it eliminates the need for daily schedules and commitments. However, this path requires significant financial preparation.

5. Freedom of Time

Some people feel retired if they have the freedom of time to do what they want to do.   Whether this means work, leisure, or the perfect combination of both.  It is this definition of retirement that has led to a boom in phased retirement.  

Many people find utility in working but also want more time for leisure.  To bridge that gap, one can gradually exit the workforce by adding flex time, reducing hours, or entering a consulting arrangement.  

Phased retirement provides one with the continued utility work brings while also allowing for more time for leisure activities.  Many employers are all too willing to offer employees this kind of arrangement as it allows for a smoother transition and greater transfer of knowledge to the new employee trying to fill your shoes.

Elements from all of these possible definitions fit together to help someone determine the right age to retire.   Obviously, a great deal depends upon an individual's unique perspectives, goals, and resources.  It also assumes one is not forced into retirement because of their own health or the health of another, creating the need to caretake.

Four Possible Paths to Your Ideal Retirement Age

According to J.P. Morgan Asset Management research, the median retirement age in 2020 was 62, whereas the median expected retirement age was 65.  

So what is the ideal retirement age for you? 

Retirement planning ultimately boils down to four potential paths, each shaped by two primary limiting factors: health and finances.

1. Retirement by necessity
2. Work by necessity
3. Retirement by choice
4. Work by choice

Let’s explore the two limiting factors in more detail. The first limiting factor is health.  Your health, or the health of another, could fail, forcing you to retire sooner than planned or desired.  

The second limiting factor is financial.  If you are healthy but cannot find a way to afford retirement, you must keep working.  If you are healthy and have the financial resources to retire, you can then choose to continue working or not.  

Find Your Optimal Retirement Age with the Guidance of a Retirement Planning Specialist

There is no such thing as an ideal retirement age for everyone. Ultimately, finding your optimal retirement age is a highly personal decision, influenced by financial stability, health, career satisfaction, and individual goals. The good thing is that you don’t have to make the decision alone and can save yourself stress by consulting with a retirement planning specialist.

If you are ready to start modeling to better understand your financial number and have peace of mind knowing the rough age at which you can afford to retire, we stand by ready to help.  Contact us here to schedule your initial consult and get your complimentary Thrive Assessment.