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How to Calculate Retirement Age

What is the best age to retire? Determining the answer to this question can be a more complicated process than you may anticipate. You must consider many factors before making this major life transition.

You’ll ask yourself – how much am I currently earning and spending? How much can I expect to spend in retirement? How much will I get in Social Security when I retire? The answers to these questions will begin to inform what the best retirement age is for you.

We have developed this guide to help you answer these questions and estimate retirement age. By coming up with general goals of your financial future, you can use a retirement age calculator for a retirement estimate and help with investment decisions on your specific financial situation.

Remember that the following is no substitute for a detailed financial plan and investment advice from a Certified Financial Planning Practitioner or CFP®. Click here to talk with an advisor.

What Is Retirement Age?

Retirement age varies from country to country. The U.S. retirement age is 62, at which point you can begin receiving reduced payments of Social Security benefits. However, if you choose to delay retirement until you reach full retirement age or your 70th birthday, you can receive full Social Security benefits.

Retirees aged 65 or older can receive some Medicare benefits for free if they paid Medicare taxes for a minimum of 10 years.

How Do I Calculate My Retirement Age?

You may be wondering – how old will I be when I retire? With our calculator, you can determine the age by which you can retire based on your current savings account rate and expected ROI. The following are the components of our age-to-retire calculator.

• Your current age: Input the age you are today.
• Current retirement savings: Input the amount you currently have invested for retirement.
• Monthly amount invested: Enter the amount you invest for retirement every month.
• Annual interest rate: Input the annual return you expect to earn on your investments.
• Amount at retirement: Enter the amount you want to have at retirement.

For example, if you are 30, currently have $50,000 saved for retirement, invest $500 each month, anticipate an annual interest rate of 7% and want to accumulate $1 million before retiring, you may be able to retire as early as age 60. You will invest only $229,000, but the interest you earn will be approximately $774,071, bringing your total to just over $1 million.

To perform your retirement age calculation, use our online retirement date calculator. Continue using this tool to ensure you are on track to hitting your retirement savings goal.

How to Calculate the Amount You’ll Need at Retirement

Retirement planning requires you to calculate your retirement age and how much money you will need to save before retirement. The most common retirement savings options in the U.S. are:

• Employer-offered retirement plans, such as a 401(k)
• Social Security
• Investment accounts and savings

You may want to replace a significant portion of your pre-retirement income. On average, Americans live 20 years after retirement. You need to ensure you have enough saved and invested to sustain you for approximately two decades after retiring.

Basing the Calculation on Income

Many financial experts recommend a replacement percentage of 70 to 85%. For example, if you make $50,000 per year, your retirement goal could be to live on between $35,000 and $42,500 per year.

Unfortunately, if you are in an early stage of your career or life, this rule of thumb might not be especially beneficial. Your income now may not reflect how much you will earn later in life or what you can expect to spend at a later life stage. Projecting the amount you will want to have for your senior years can be challenging if you are unsure what your pre-retirement income will be.

This rule of thumb also assumes you spend most of what you earn. If you are a saver by nature and spend a much smaller percentage of what you earn every year, it might not make sense for you to use this method to calculate your retirement savings. If you spend more than what you make and rack up credit card debt, perhaps this approach won’t work for you either.

Basing the Calculation on Spending

For many, a better method for calculating retirement savings is to base the calculation on spending instead of income. This method can be useful for anyone, regardless of whether you are a spender or a saver.

The amount you spend in retirement will likely differ from what you spend today. For instance, you could pay off your mortgage before retirement, so you will not have a monthly mortgage payment. If you have children, they may be living on their own, so you no longer need to financially support them. You will also no longer have costs associated with work, like child care, commuting and business attire.

However, you might have new expenses in retirement. The most significant financial concern for seniors is medical care costs, including out-of-pocket prescriptions. Health care can be expensive, and it may be wise for you to have enough saved to ensure you can cover these costs without incurring debt or burdening your children.

You may also want to outsource some of your housekeeping tasks — such as shoveling snow, cleaning gutters, and raking leaves — all of which you could struggle to perform yourself or possibly not want to deal with in your golden years. Many retirees also use their retirement years to travel and explore hobbies, which can get expensive.

Considering that your current expenses can decrease, but you will also have new ones in retirement, it can be reasonable to assume that what you currently spend is close to the amount you will spend in the future.

Multiply Your Yearly Spending by 25

Another rule of thumb financial experts recommend for calculating your retirement savings is multiplying your current yearly spending by 25. Your portfolio should be this size for you to withdraw 4% safely from your portfolio each year to live on.

For example, if you currently spend $30,000 each year, you may want an investment portfolio of 25 times $30,000 by the beginning of retirement, which is $750,000. With this sum, you can withdraw 4% each year while likely ensuring you will not outlive your money.

This amount could seem daunting — especially if you spend more than $30,000 annually and need to save even more for retirement — but if you start saving early, you can amass a portfolio this size even on an average salary. The earlier you start saving, the less you will need to set aside each month to reach your retirement goal.

How to Start Saving for Retirement Later in Life

Of course, you can still reach your retirement goal even if you don’t start saving until later in life. The most notable difference is that you need to save more each year, which can be easier if you are making more money at a later stage in your career. If you are starting to save for retirement later in life, follow the tips below to get started.

• Increase your income: When you start saving for retirement later in life, it may be beneficial to find ways to bring in additional earnings, so you can save more for retirement each month. Ask for a raise at work or find another job that will pay you more and offer better retirement benefits, like employer-matching contributions to your 401(k). Alternatively, you can start a side hustle to build an extra source of income.
• Decrease your spending: It might also be beneficial to find ways to decrease your spending. Track your monthly expenses and determine where you can cut unnecessary spending. Review your bills and see if you can cut those as well, such as by switching auto insurance providers or asking for a discount on your cellphone bill. If you can increase your income and decrease your spending, you can save even faster.
• Save more of your income: If you start saving later in life, you may need to set aside a larger percentage of your income for retirement every month. You will also need to balance riskier and safer investments when you are closer to retiring and have less time to recover from losses and dips in the market.
• Track your progress: Regularly use a retirement calculator to ensure you are on track to hitting your savings goal by retirement age. Investing for retirement is a long-term goal, so don’t worry too much about scary stock market headlines and inflation rate. You could curb your progress by watching the market daily and making impulsive decisions that may hurt your long-term progress.
• Invest in index funds: You may want to spread your investments among stocks and bonds and invest in low-fee index funds. Continue to do so throughout your career until you reach your goal of at least 25 times your current annual spending.

Further, you might want to reevaluate the lifestyle you want to have in retirement. You could be able to lower your expenses by downsizing your home or retiring to a state without an income tax, or perhaps you want to retire overseas in a country with a lower cost of living.

How Does Social Security Impact Retirement Age?

Your Social Security benefits may influence the age at which you choose to retire. If you decide to retire before you reach full retirement age, this can impact the percentage of your Social Security benefits that you receive.

What Is Full Retirement Age?

Full retirement age is the age at which you have access to your full Social Security benefits. Your life’s earnings determine this amount. If you were born between 1943 and 1954, for example, your FRA is 66. The full retirement age in the U.S. for those born in or after 1960 is 67.

Full retirement age also applies to your spousal benefits, which you can collect from your husband’s or wife’s work record. For survivors born between 1945 and 1956, the full retirement age is 66. For survivors born in or after 1962, the full retirement age is 67.

What Happens If You Claim Social Security Before Full Retirement Age?

If you opt to begin receiving your benefits early, your benefits will be a small percentage less, based on the number of months you have retired before full retirement age. A reduction also applies if you choose to claim your spousal benefits early.

For example, according to the SSA’s retirement age chart, if you were born in 1959, your full retirement age is 66 and 10 months. If you choose to retire at 62, your $1,000 retirement benefit would decrease to $708 — a reduction of nearly 30%.

What Happens If You Claim Social Security After Full Retirement Age?

If you claim your Social Security benefits after you reach full retirement age, you can receive full Social Security benefits plus any delayed credit you earn after full retirement age (FRA). Many rely on Social Security for their retirement savings plan, which means you may want to delay retirement until you reach this age.

Retirement Age FAQ

Below, we answer some of the frequently asked questions about retirement age in the U.S.

What Is the Average Retirement Age?

The average retirement age is 64 for men and 62 for women, but before you start counting the number of years you have left in the workforce, you may want to know some crucial factors.

About half of workers intend to continue working past age 65, and many retirees return to work. Some cut their workload to part-time, and others choose to change careers. Some retirees even return to working full-time and retire again later. In other words, the average retirement age isn’t very clear-cut.

Additionally, if you base your decision on the average retirement age of 61, you won’t be able to collect your Social Security benefit and you won’t be eligible for Medicare.

How Do You Determine Full Retirement Age?

To determine your full retirement age, check out the retirement age chart provided by the Social Security Administration. This chart breaks down your full retirement based on your birth year and illustrates how much you would reduce your retirement benefit if you cash in before full retirement age.

Talk With an Advisor

The reality is that a thorough financial plan includes far more than what a retirement savings calculator can replicate. Calculators like these can get you going in the right direction but cannot talk you through the intricacies of life, with real estate, college savings, aging parents, vacations, market volatility, and more.

At Fort Pitt Capital Group, we are financial advisors. We have been in the financial services industry since 1995, and we have committed to holding our advisors to high ethical standards when providing services to clients from the beginning. Earning and maintaining your trust is the focus of everything we do.

We are Registered Investment Advisors (RIAs), meaning we aim to serve you instead of selling you products. We approach each decision with analytical rigor and thoughtfulness. Contact us at Fort Pitt Capital Group today to speak with a financial advisor, determine your retirement age, and discuss your retirement plan. Our goal is to provide you with the peace of mind that comes with financial stability.