Want more money in retirement? Retire at one of these 3 ages
According to a survey by the Empower Institute, running out of money in retirement is the biggest concern of current retirees and future retirees. This is a valid concern, especially as retirement becomes increasingly expensive.
However, saving for the future can be difficult and many workers fall behind on their savings. In fact, the average baby boomer only has $152,000 saved for retirement, according to a report from the Transamerica Center for Retirement Studies. For many retirees, that money won’t last more than a few years.
If you’re struggling to save, you might want to consider adjusting your retirement age. And retiring at any of these three ages can make your money grow.
1. 62 years old
Once you reach your 62nd birthday, you become eligible to start claiming Social Security benefits. Keep in mind that by claiming as soon as possible, however, your monthly payments will be lower than if you had waited a few years. However, if you’re aiming to retire as soon as possible while stretching your savings, Social Security benefits can help your money last longer.
Plus, retiring at age 62 means you won’t face early withdrawal penalties on your retirement savings. If you have a 401(k) or a traditional IRA, withdrawing your money before age 59.5 will result in a 10% penalty on the amount you withdraw. So if you choose to retire early, it may be a good idea to wait until you reach 60 to avoid penalties.
2. 67 years old
If you apply for Social Security at age 62, your benefits will be permanently reduced by up to 30%. In order to receive the full amount of benefits to which you are entitled, you will have to wait until full retirement age (FRA).
Your FRA depends on your year of birth. If you were born in 1960 or later, your FRA is 67. That means most future retirees will have to wait until age 67 to claim Social Security if they want to avoid benefit cuts.
There’s also a common misconception that if you apply early, your benefit amount will automatically increase once you reach your FRA. A whopping 69% of baby boomers share this (erroneous) belief, according to a Nationwide Retirement Institute survey, and falling into this myth could affect the age at which you start claiming benefits. So before filing your claim, make sure you know how the age you are claiming will affect your long-term benefit amount.
3. 70 years old
If you wait until age 70 to start claiming Social Security, you’ll receive as much as possible each month, which can give your retirement income a serious boost. When you delay benefits beyond your FRA, you will receive a bonus each month. If you have a 67-year-old FRA and wait until age 70 to apply, you’ll receive your full benefit amount plus an additional 24% each month for the rest of your life.
Delaying benefits can be difficult for many workers, especially if you’re eager to retire as soon as possible. But it can potentially increase your benefits by hundreds of dollars a month, which can go a long way if your savings are lacking.
Keep in mind that no matter what age you start claiming Social Security, you don’t necessarily need to retire at the same time. However, if you retire first and then wait a few years to claim, you risk depleting your savings too quickly. So, in many cases, it makes sense to retire and claim benefits simultaneously.
Choosing when to retire is a big decision, and it’s important to take it seriously. Retiring at one of these three ages can make it easier to stretch every dollar in retirement.