Having the ability to retire and when are still some of the largest and most important questions people ask today. Obviously, this question isn’t easily answered in a blog post, as the ability to retire and when is completely different for each person. So, I’ll be looking at different factors to consider when you think about retirement and whether or not 65 is a realistic number in general. We will begin with a quick look at why 65 is the number we all use for retirement and why we may need to update that.
Why 65?
The age of 65 has long been used as the age of retirement in this country, and is the number most people plan on as retirement age. This is because that was the age of full retirement according to the original Social Security Act of 1935. I do not think it would be bold to say that the world has changed since 1935, and that we face different issues in terms of personal finance. However, the office of social security has updated the full retirement age, so as of 2019 the full retirement age is 66 and 8 months and will continue adding two months annually until it hits 67. So, perhaps our collective awareness needs some updating as 65 is no longer than official full retirement age. So, with the retirement age updated, can we retire at age 67?
You Can’t Cheat Math
Retirement planning is ultimately a numbers game, and while that should be fairly obvious it has real consequences if you try to cheat the math. Being able to retire at 67 will always come down to spending less than what you earn. For those in your 20’s, 30’s, and 40’s it may seem like a long time before you’re ready to retire, so you can afford to make big purchases and spend outside your income. However, you cannot cheat on the math. If you want to be able to stop working at a specific time, you will need to be diligent in planning out that time as something realistic, and be disciplined to not stray from the path you have created.
This means you can either cut back on expenses and spend less to allow yourself to sock money away for retirement, or increase your earnings. The math will always be there, and if you are unable to subtract from one side, you must add to the other. If you make 100k per year, simply do not live like you make 200k. If you live like you make 200k, you should be earning 250-300k. This is what determines your ability to retire at the age you want and it is both very simple and incredibly complicated. Now that we have covered the math behind retirement age, we can move on to the question of if you should retire at 67.
Should You Retire on Time?
Retirement for many of us is a time when we can shed most of our responsibilities, take our hard earned money and set out to accomplish all the things we didn’t get a chance to do while working. However, there are a number of reasons to delay retirement or at least go down to part time at the same job or a new job, as a healthier way to approach retirement. Starting with social security, it can be advantageous to delay taking social security for as long as you can. While you are eligible for social security benefits at age 62, by deferring those payments to later, you can collect larger checks the longer you wait. This is of course all based on the idea that social security will still exist when our generations are ready for retirement which is certainly not guaranteed, but this a topic for a whole other blog post. Regardless, by waiting to collect social security you can set yourself up a bit better when you do decide to finally stop working.
Another huge reason to delay retirement is simply that we are living longer. If you retire at age 67, you may have 20+ years left to occupy yourself. Social security was only really designed to replace about 40% of your pre-retirement income while most retirees need somewhere in the vicinity of 70% to live comfortably. By working later and saving more, you will be able to have a much more comfortable retirement and give yourself opportunities that you may not have had if you had stopped working earlier. This makes a lot of sense for those who did not pay attention to or plan for retirement in their younger years and relied on social security to see them through retirement. Finally, there is the social aspect.
For most of us, when we reach retirement age, most of our social activity and relationships revolve around our workplace. By retiring, you will likely be cutting off a large portion of how you spent your time outside of work as well as the relationships you’ve built up through work. This is why it is vital to find an activity or hobby in retirement if you do not want to work part time. This also varies widely with the type of person you are. Some people are perfectly content to spend time alone or with their spouse without doing too much, while others feel cooped up and bored after a day of inaction. If you are someone who cannot stand doing very little, it can be a great idea to find a part time work opportunity in order to give you a sense of accomplishment, as well as build new relationships.
Whether you have the ability to retire at age 67 is based on your financial habits, planning, and discipline throughout your career. However, as you begin to think about what goals you want to accomplish and what retirement looks like for you, it may make sense to push back the retirement date in order to provide a better retirement for yourself. For those of you looking for a simple answer to “Can you retire by age 65?” the answer is yes. I don’t know if you specifically can retire by then or even should, but it is possible. But like many aspects of finance and financial planning, this is not a black and white picture.
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