Your retirement age determines when and how you can access your retirement funds. The rules regarding retirement age vary from plan to plan and from country to country.
Social Security Retirement Age
The earliest age you can start collecting your Social Security retirement benefits is 62, but just because you can collect them at that age doesn’t mean you should. You will receive a larger monthly amount if you claim it at a later age. Additionally, if you collect Social Security at 62, or anytime before your full retirement age (which varies based on your birth date), and you continue to work and earn an amount that exceeds the earnings limit, your Social Security benefits will be reduced. Do not start collecting Social Security benefits until you understand how the age you start affects your benefits. Married couples in particular need to plan carefully as they can often receive an enhanced survivor benefit when they coordinate when and how to start their benefits.
Age You Can Start Withdrawing from a 401(k) Plan
You may be eligible to withdraw money from your 401(k) plan at age 55. Different rules apply to distributions you take at different ages. The key retirement ages for 401(k) plans you should be aware of are 55, 59 1/2, and 70 1/2. If you have not reached age 55 and need access to your 401(k) funds, you may be able to use a 401(k) loan or hardship withdrawal, but be cautious of early withdrawals. There is creditor protection offered for funds in a 401(k) plan, so think twice before withdrawing your money from the plan.
Average Retirement Age in the United States
The Retirement Institute tells us that the average retirement age in the United States is 63, and the average length of retirement is 21 years. Interestingly, Social Security defines 62 as early retirement; start taking benefits at this age and you will receive a reduced Social Security benefit. Those with pensions and sizable savings who can budget will likely be in good shape if they choose to retire at 62 or earlier. Those without those things need to consider working past the average retirement age.
Early Retirement
Many Americans believe that age 55 or younger is early retirement. If you can save enough early in life, early retirement is possible. Early retirement is most common for those who save aggressively or who started working early in the military or in some type of civil service (which means they qualify for a pension at a young age). For those who do not have pensions, instead of early retirement, consider finding a job you love to do. Many people use early retirement from one job as an opportunity to find a second job they really enjoy.
Official Retirement Age vs. Effective Age by Country
The official retirement age and effective retirement age are two different things, and they vary from country to country. The official retirement age is the age at which you begin to receive government retirement benefits. The effective retirement age is the age that people choose to retire, even if benefits are not yet available.
What Rules Apply at Any Age?
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This is the timeline for retirement age regarding events related to retirement planning that are activated at specific ages, and what you need to do as you approach each age. The key ages are 55, 59 1/2, 62, 65, 70, 70 1/2, and 75. Before choosing your retirement age, you will need to familiarize yourself with the rules. There are things you should do as you approach each age.
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Sources:
- Social Security Administration. “Starting Early Retirement Benefits.”
- Internal Revenue Service. “401(k) Resource Guide – Plan Sponsors – General Distribution Rules.”
- Association of Actuaries. “A Review of U.S. Retirement Demographics,” page 10.
Source: https://www.thebalancemoney.com/what-to-know-before-you-choose-your-retirement-age-2388281
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