Retiring at an Early Age

Historically, most Americans have considered 65 to be their target retirement age. This is likely the result of past Social Security laws which allowed for a full benefit beginning at age 65. However, now most people will not get their full Social Security benefit until age 66 with the full retirement age continuing to increase in two-month increments every year until it reaches 67 for those born in 1960 or later.

Workers today, however, are retiring at earlier ages than in years past. In just the last few years, for example, the average age for retiring has dropped to age 63. And many younger workers are planning on retiring even earlier.

What You Give Up

This trend towards retiring earlier is not without its costs. Here are a few of the financial results of early retirement which must be considered carefully:

• Not only are Social Security benefits reduced for early retirement, but the “full benefit” age is being gradually increased to age 67.
• Retiring early often eliminates ones greatest earning years and the resulting savings that would have taken place in these years.
• The annual benefit provided by employer sponsored defined benefit pension plans is usually based on a combination of years of service and your ending salary. Both are reduced by early retirement.
• Health care costs tend to increase for retired individuals. Benefits that were once paid for by employer sponsored coverage often become the responsibility of the retiree.

Consider Your Options Carefully

Choosing when to retire is one of the most important financial decisions you will make. Consider your options carefully. Careful planning can help ensure you a happy and financially independent retirement.