What Is the Average Retirement Age?

There’s that old saying that timing is everything—it’s true when it comes to finding love, hitting a baseball, and figuring out the right time to retire.

And there are lots of factors that go into making the decision to ride off into the sunset of your golden years. Your dreams for retirement play a role. (Where do you want to live? Do you want to travel? Do you want to start a business?) So does your health and how much you’ve been able to save over your working years.

Your answers to those questions will help you figure out when you might be able to retire and, more importantly, how much money you’ll need to have in your nest egg to enjoy retirement on your terms.

But what about the people around you? When are they deciding to call it quits for the last time?

When Do Most People Retire?

Today, the average person retires around age 62. Interestingly, many current workers expect to keep working until age 66.¹ That means some folks think they’ll be able to work longer, but end up retiring earlier than expected—sometimes years earlier.

Muddying the picture even more, many retirees wind up “unretiring”—changing their minds and going back to work thanks to some combination of rising living costs, debt and boredom (you can only play so many rounds of golf).² So, determining a true average retirement age is really tricky.

What Factors Affect Your Retirement Age?

Everyone’s retirement age depends on several different factors . . . but what are those factors, exactly? Let’s talk about the ones that are the most likely to affect when you’ll be able to retire—and what they mean for your specific retirement outlook.

1. Health, Layoffs and Family Reasons

There’s a dangerous myth in the workforce today. People think if they have a meager (or nonexistent) retirement fund, they can work past the average retirement age to maintain their income and try to build up their savings. You might have even heard someone say, “They’re going to carry me out of this place in a casket.”

Time to lay down some truth. A recent study found that about half of retirees left their jobs sooner than they planned, and most of them did so for reasons that were out of their control.³

Let’s translate that: You may think you’ll work longer to make up for lost investing time, but you probably won’t. At least that’s what the numbers tell us. While working a couple of years longer may work out for some, it’s not a guaranteed option for everyone.

Some folks get laid off. Others have to take care of a sick spouse or relative. Many folks retire because of their own health problems. For a lot of people, staying in the workforce just wasn’t an option given their circumstances.

2. Savings Rate

Do you know the factor that’s the most likely to determine your retirement success? Hint: It’s not necessarily your investment choices or the rate of return on your investments. Nope! It’s your savings rate.⁴ It turns out the folks who have enough money saved to retire are the folks who actually put money into their retirement accounts month after month, year after year. What a concept!

Market chaos, inflation, your future—work with a pro to navigate this stuff.

But when you’ll be able to retire depends a lot on how much you’re putting away for retirement each month. The more you save, the faster your money will grow (and the sooner you’ll be able to retire). That’s one of the reasons we recommend investing 15% of your gross income for retirement to make sure you stay on track.

3. Amount of Time to Invest

Unless you’re Marty McFly, you can’t go back in time and tell your younger self to start investing for retirement right after college (or put some money on the Cubs to win the World Series). But what you can do is start investing today. There’s a saying that the best time to start was yesterday—but the next best time is now.

The amount of time you plan to invest and hold on to your investments is called an investment horizon. Time and compound growth can really work together to help your money grow by leaps and bounds if you’re still many years or decades away from retirement! But if you have a shorter investment horizon, you may need to invest more money to play catch-up.

4. Return on Your Investment

When you invest your money, you’re putting those dollars to work and expecting something (growth) in return! But let’s just say some investments work harder than others . . . and then there’s junk out there that looks like an investment but then crashes and burns faster than you can say “cryptocurrency.”

You want to invest in something with a proven track record of strong returns over time. If you just keep putting your money in “safe” investments like bonds or certificates of deposit (CDs) and expect that to be enough to retire on, you’re in for a rude awakening.

We recommend spreading out your investments evenly between four types of growth stock mutual funds—growth and income, growth, aggressive growth, and international—that allow you to add stocks from dozens or even hundreds of companies to your retirement portfolio. That way, you build a diversified portfolio that lowers your risks while still letting you enjoy the growth of the stock market. It’s the best of both worlds!

5. Lifestyle in Retirement

When you retire, do you want to downsize or buy the house of your dreams? Do you want to travel the world or spend lots of time close to home with the grandkids? Do you want to be so outrageously generous that even Warren Buffett would blush? These kinds of questions will help clarify the kind of income you’ll need when you retire and how long it’ll take you to build a nest egg that’ll provide that income.

6. Length of Retirement

It’s impossible to know exactly when you’re going to kick the bucket. But you can still make an educated guess as to how long your retirement will last and make plans based on that.

Most folks retiring today at age 65 can expect their retirement to last roughly 20 years.⁵ So then you have to ask yourself: Do you have enough money in your retirement accounts to last you two decades of retirement? That’s a question only you can answer.

Obviously, if you want to retire early, you’ll need to stretch out your retirement funds even further—so keep that in mind while you’re planning!

7. Social Security and Medicare Benefits

While folks can start taking Social Security retirement benefits at age 62, most people can’t collect their full retirement benefits until age 67 (if you were born after 1960).⁶ In other words, the longer you wait to start collecting retirement benefits, the larger your monthly benefit will be.

And on top of that, eligibility for Medicare doesn’t kick in until age 65 . . . so you would need to fill in that health insurance gap somehow if you retire before then. And in case you haven’t noticed, health insurance can be really expensive to cover on your own.  

Some workers will decide to put off retirement for years so that they can collect a larger monthly benefit from Social Security or stay on their company’s health insurance plan until they’re eligible for Medicare. However, with some proper planning and help from a financial advisor, you could still retire when you want on your terms.

How Much Money Will I Need for Retirement?

We get why you’d want to know what age most people retire. You can use that as a benchmark and work backward to figure out how much time you have left to work and save until you can think about retiring.

But the problem is that What’s the average retirement age? is the wrong question. That’s because retirement isn’t an age—it’s a financial number. That means your goal shouldn’t be to retire at a certain age. Instead, your goal should be to identify how much you’ll need in retirement savings to retire on your terms.

If you can retire when you reach a certain amount of money (and not a certain age), then how much will you need? It depends. We can’t give you a specific number because we don’t know what your dreams are for your retirement years.

You can figure out your financial number by using our Retire Inspired Quotient (R:IQ). It’s a free retirement assessment tool that helps you understand how much money you’ll need to retire on your terms. Plus, it also gives you an idea of how much you need to save each month to help you get there.

How Much Should I Save for Retirement?

If you’re out of debt (everything except for the house) and have a fully funded emergency fund in place (with 3–6 months of expenses saved), congratulations! That means you’re on Baby Step 4 and you’re ready to start investing for retirement.

One of the first questions folks ask when they reach this step is how much they should invest for retirement. Here’s the answer: Invest 15% of your gross income in good growth stock mutual funds inside of tax-advantaged retirement accounts like your 401(k) at work and a Roth IRA. This simple game plan has helped millions of Americans secure their retirement future!

Why 15%? Because if you save 15% of your income consistently over time, the math says you will become a millionaire. Here’s the proof: The median household income in America is around $80,610.⁷ If you invest 15% of your income, that means you’re investing about $1,007 a month for retirement.

Now, the S&P 500—which measures the overall performance of the stock market—has an average annual rate of return between 10–12%.⁸ Which means if you invest $1,007 each month from age 30–60 and get average returns, you’ll have roughly $2.8 million in your nest egg for retirement. That’s the power of saving 15%!

This isn’t rocket science or some magic formula, folks. There’s a whole group of millionaires called Baby Steps Millionaires who followed Dave Ramsey’s 7 Baby Steps to build wealth over time so they could live and give like no one else. By following the Baby Steps, they were able to pay off all their debt and become millionaires in about 20 years—and so can you!

Am I on Track With Investing for Retirement?

You might be wondering if you’re on track with your retirement savings. Again, the answer isn’t so simple. It depends on how much money you’ve already saved, how much you want to have saved for retirement, and how much you invest every month.

Once you’re debt-free except for the house and have a fully funded emergency fund of 3–6 months of expenses in place, you should invest 15% of your income in tax-advantaged retirement accounts:

• Start with your workplace 401(k) and invest up to the company match.
• Then open up a Roth IRA and invest up to the contribution limit, if possible.
• If you still have money left over, go back to your 401(k). And if your company offers a Roth 401(k), you’ve got it made—you can invest your whole 15% there.

While you’re investing 15% for retirement, you should also be trying to pay off your mortgage early. Once your house is paid off and you don’t have any more mortgage payments, you can invest even more!

We understand 15% might seem like a lot. But listen, your income is your biggest wealth-building tool. Once you’re out of debt, you’re free to use your income to build wealth. It’s a lot easier to make room for investing when you don’t have payments.

Plus, chances are you can make even more room in your budget by cutting nonessential items like cable subscriptions and eating out. Skip the fancier car and nicer wardrobe, and invest in your future instead. You can do this!

Now, even though we can’t get specific about whether you’re on track with your investments, we can give you a scenario and you can see how your situation might compare. These benchmarks are based on an annual salary of $50,000—but you can use our Investment Calculator and plug in your own numbers.

1. Ages 25–35: If you’re in this age group, you have the best chance of reaching your financial goal in the shortest amount of time. Start investing as soon as you can. Talk with an investment professional who will work with you for the long term. If you make $50,000 annually, then 15% of your income would be $7,500 a year (or $625 a month). If your income isn’t that high, don’t worry. There are ways to build wealth on a smaller salary. Don’t give up. 
2. Ages 35–45: If you’re 35 and started investing $625 a month at age 25, you should have around $135,000 in your investment portfolio. If you’re closer to age 45, that number could be near the $550,000 mark. If you haven’t started investing yet, you need to get seriously focused if you want to hit the million-dollar mark. It’s time to start putting first things first. 
3. Ages 45–55: Gut-check time. If you’re 45 and have no retirement savings, you need to invest $900 a month from now until you’re 67 to reach $1 million. That’s the good news—you can still retire on your own terms. But you’ll need to slash your budget and make some sacrifices to get there. How much you save for retirement is entirely in your hands. 
4. Ages 55 and up: Congratulations! If you started investing that $625 a month when you were 25, you should have about $1.7 million in your retirement fund by age 55. If you’re 65, you could have more than $5 million in your nest egg! Now do you understand the importance of investing early?

If you’re over 55 and don’t have much in your retirement fund, you need to rethink your expectations for the future. If you’re able, you need to work as long as possible. It’ll also help to downsize to a smaller home and lower your expenses. And you need to talk with a financial advisor about how to make the most of the money you can invest and save.

What do you do if your retirement fund isn’t where you want it to be at the age you are right now? You have two choices: Increase your income or decrease your expenses so you can invest more. Increasing your income means taking on extra jobs or switching to a job that pays more. Decreasing your expenses means tightening your budget or even downsizing your home to free up some equity to put in your retirement fund.

Tips for Building Wealth for Retirement

For The National Study of Millionaires, the largest survey of millionaires ever done, we talked to more than 10,000 millionaires from all across the country to learn more about who they are and what they did to reach millionaire status and prepare for retirement.

It turns out most millionaires share similar habits and principles. And that means you can start building those same habits and following those same principles starting today so you can become a millionaire yourself. Here’s the list of million-dollar habits:

1. Stay away from debt.
2. Invest early and consistently.
3. Make savings a priority.
4. Increase your income to reach your goal faster.
5. Cut unnecessary expenses.
6. Keep your millionaire goal front and center.
7. Work with an investing professional.
8. Put your plan on repeat.

Looking at the retirement picture, the average American isn’t prepared for the future. Only 34% of American families think their retirement savings are on track.⁹ We don’t know about you, but we’re not content with being average—we can definitely do better than that.

If you start to make these eight habits and principles part of your life, you’ll set yourself up for the kind of retirement you’ve always dreamed about!

 

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.