What is the average retirement age?

In a nutshell

Although most people assume that 65 is the typical retirement age, that is not always the reality. Health, finances and family needs impact when and how you are able to retire.

• The average retirement age for men in 65.5 years-old and 63 years-old for women in the United States.
• Occupations in the natural resources, construction, and maintenance occupations employ far fewer workers over 65 than management, professional, and related occupations, implying a difference in retirement age between blue collar and white collar workers.
• Full retirement age (FRA) for workers to receive 100 percent of their Social Security benefit is 67 for those born after 1960.

So, what is the average retirement age? In this article, we will provide the average age of retirement for men and women, the average savings by age, and how much money you'll need to retire. Plus we offer eight strategies to boost your retirement savings.

What is the average retirement age?

According to Social Security, the "full" retirement age is 67 for people born after 1960. However, most people retire at different ages based on medical needs, life choices and how much they’ve saved (or haven’t).

On average, women retire at 63 years, while men retire at 65.6 years, according to a 2022 study by Mark J. Warshawsky of the American Enterprise Institute.

Some investors who follow the "FIRE Movement" (financial independence, retire early) save aggressively to retire years or even decades ahead of these averages. Others continue working into their 70s or later because they didn't save enough. Personal finance is truly a personal decision, so don't be upset if your personal situation is different from someone else's.

What is the average retirement savings by age?

Many investors want to measure their progress against others who are of the same age. Comparing account balances against others gives investors the feeling of being "ahead" or "behind" where others are.

The Federal Reserve Bank, has published data on the mean household retirement savings totals defined by generation.

These numbers can be misleading, however, if you don't take other important factors into account. For example, savers with larger account balances may also have had larger incomes and expect to spend much more in retirement to maintain their lifestyle. Average account balance are also distorted by the very small number of savers who have extremely high savings balances.

A better option is to work with a financial advisor to assess your current situation, savings rate and investment allocations to determine if you're on track to meet your goals.

How much money will I need for retirement?

The amount of money that you need in retirement varies based on lifestyle choices, remaining debt, estate planning goals, health and other considerations. Many retirement experts suggest planning to have enough replacement income for at least 70% to 80% of your pre-retirement income.

General guidance suggests that you don't need to replace all of your pre-retirement income because many expenses will decrease. Retirees no longer need to commute or buy work clothes. Their homes and student loans (for them or their kids) may be paid off. They no longer need to contribute to IRA, 401(k) and other investment accounts. And, once they turn 65, they qualify for Medicare, which eliminates a big portion of their health insurance premiums.

While some expenses decrease, others go up. Since retirees are no longer working and commuting for 8-10 hours a day, they have more time for travel, hobbies and other activities. Many of these cost money that they weren't spending before retirement. Additionally, medical expenses also tend to increase with age. Because of this, other experts suggest targeting a 100% replacement of your pre-retirement income to be more conservative.

What is a reasonable amount of money to retire with?

While some investors will want to target replacing 70% to 100% of their pre-retirement income, others who no longer need to pay for college for dependents or support older parents may only need 50% of their pre-retirement income, or less.

Moreover, not all of your retirement income needs to come from investments. Social Security benefits help you to meet your retirement income needs. Other sources of income like rental properties and pensions also provide regular income in retirement. And some retirees continue working past the traditional retirement age to bring in extra money, which further reduces how much they need to save.

These other sources of income reduce the amount of money that you need to save in order to meet your retirement income needs.

By factoring in other retirement income sources, your retirement nest egg number is reduced from $2 million to $725,000, when using the 4% Rule. The 4% Rule assumes that you can withdraw 4% of your portfolio balance in the first year of retirement. Then, you increase your withdrawals each year based on inflation. According to Monte Carlo simulations of stock market returns, this guideline provides a strong chance that your portfolio will provide income for the remainder of your life.

Most investors have other sources of income that they can draw from in retirement, and their retirement goals aren't as big as you might expect. Because of this, a reasonable amount of money to retire with for investors is $500,000 to $1 million. Just remember that "reasonable" varies by person and depends on your goals, retirement lifestyle and any debt you may still have.

Social Security benefits aren’t enough

Social Security benefits are one of the many sources of retirement income for many people. You can start drawing benefits at age 62, but claiming benefits before your full retirement age reduces your monthly paycheck. By waiting until age 72, you can maximize your Social Security benefits for the rest of your life. And your spouse will benefit from this delay too since many spouses claim spousal benefits, which are based on the higher-earning spouse.

As of January 2024, the average monthly Social Security check was $1,767.03 for retired workers, spouses and their children. For most investors, Social Security benefits are not enough to meet your retirement income needs. This leads to a retirement income gap.

The retirement income gap

The retirement gap is the difference between what your retirement income needs are and how much you'll receive from sources like Social Security and pensions. This is the amount of money that you need to generate from your investments, like stocks, bonds, real estate, annuities and other sources.

To close the retirement gap, you can save more, earn higher returns on your money, or both. The best approach is to speak with a financial advisor to quantify your retirement gap and create a plan to close the gap as much as possible before your retirement date.

What can you do if you’re behind on retirement savings?

If you're behind on retirement savings, there are some simple steps that you can take to create a brighter financial future. Implement one or more of these tasks to start boosting your retirement portfolio.

Contribute to all available retirement plans

Many workers can contribute to both a 401(k) and an IRA, but only invest in one. Investing in each retirement plan that you have access to gives you more flexibility and higher total annual contribution limits.

Earn your company's contribution match

Companies encourage employees to participate in retirement plans by offering a match. This money is on top of the money that you contribute from your paycheck. Make sure you get all of this free money by contributing at least enough to earn the full match. For example, a "50% match up to 6%" means that you'll get an extra $0.50 for every dollar that you contribute, up to a maximum of 6% of your salary.

Use annual raises to boost retirement savings

Raises are extra money that you haven't started spending yet. So, this is the perfect opportunity to set aside extra money for your future self. For example, if you receive a 3% raise, you can increase your retirement contributions by 1% and still have 2% to cover additional expenses.

Re-evaluate your mix of stocks and bonds

Many investors are too conservative with their investment choices, which robs them of the opportunity to grow their portfolios. Speak with an advisor or take an asset allocation quiz online to determine if you have the right mix of stocks and bonds in your account. Be sure to adjust the allocation of your contributions as well to ensure that you're adding new money to the right investments.

Take advantage of "catch-up" contributions

The tax benefits of retirement plans are so generous that the IRS limits how much you can contribute each year. Contribution limits for people under 50 to IRAs are $6,000 and 401(k) accounts are $20,500 annually. Investors who are 50 and older have a unique opportunity to invest even more money each year to "catch up" on their retirement savings. These amounts may increase year to year. However, for the tax year 2022, you can contribute an extra $1,000 to your IRA and $6,500 to your 401(k) each year.

Open a brokerage account

For investors who are maxing out their IRA and company retirement accounts, a brokerage account is an excellent choice. There are no contribution limits and you can buy and sell as often as you like without any penalties. The downside, however, is that you are taxed on the dividends, capital gains and other income you receive each year.

Invest in an annuity

An annuity offers tax deferral on investment income and does not have required minimum distributions (RMDs) like a Traditional IRA does. Annuities are a good option for investors who have already maxed out their IRA and 401(k) contribution limits.

There are annuities that offer fixed returns and others that invest in accounts that are similar to mutual funds. And when you reach retirement age, you can withdraw on an as-needed basis or convert your balance into a lifetime stream of income.

Diversify into alternative investments

Stocks and bonds are the foundation of a strong retirement portfolio. Adding alternative assets can help to boost portfolio returns, mitigate risk, or both. Alternative assets include real estate, commodities, collectibles and more. Some mutual funds target these sectors of the economy and can be added to your portfolio through your IRA, 401(k), or brokerage account.

The AP Buyline roundup: Take stock and set goals

The Social Security Administration says that the full retirement age is 67 years for people born after 1960. While many of us plan on retiring at a certain age, the choice may not be ours to make due to health, finances and other factors.

Start by assessing your current income, savings rate and investment account balances. While you may be tempted to compare your numbers against your peers, you're better off comparing against your goals. Working with a financial advisor can help you better understand your unique situation, but many online calculators and financial tools also provide a good starting point. If you're behind where you want to be, follow our eight tips to boost your savings to reach your financial goals.