Picking a Retirement Age That Works

Just for fun, have this conversation with a friend, co-worker or (if you dare) your spouse: Picking a retirement age.

The whole subject makes people nervous, and with good reason. Picking a retirement age implies a lot of positives, such as leisure, freedom and less stress in general.

It also implies risk, since leaving work means your income takes a hit. Your money had better last.

The credit crisis and our roller-coaster stock markets are having an impact, of course. New Gallup data out shows that Americans on average think of 61 as a target retirement age, up from 59 about a decade ago and 57 back in 1991.

The rise might not seem like much, but four extra years of working is a pretty good percentage jump, considering most careers last 40 years maximum.

Our outlook skews as we age, too: More than half (51%) of the folks who currently have a job and who are over the age of 58 believe they’ll work past 65. Those between the ages of 50 and 57 saw that outcome as much less likely (just 36% see themselves working past 65). The average non-retired American currently expects to retire at age 66, up from 60 in 1995, Gallup says.

The U.S. Census puts the actual retirement figure at about 64 for men and 62 for women. The earliest age at which a U.S. taxpayer can collect Social Security is 62, and many do. Some might simply be tired of the grind and ready to jump ship as soon as they can.

Picking a retirement age in three questions

Assuming you will be picking a retirement age, rather than having one picked for you by an employer, what’s the ideal? Here are three simple questions to consider when picking a retirement age:

1. Do I have enough to last until I am quite old?

You will live a long time in retirement, with any luck.  Americans who last to 65 are expected to live another 19.2 years on average. If you get to 75, then add 12.2 more. The fact is, people who live longer tend to live even longer still. Consider what it will take to sustain yourself for all that time.

2. Is my family health history generally good, or so-so?

It’s never a good idea to plan an early death, even if your family experience suggests it’s likely. Part of the reason is that you could easily be the exception.

The other is that a history of health problems in old age implies added costs. You can work around these obstacles with long-term care insurance, but even that will cost you more if you wait to buy it.

3. Can I adjust well to doing nothing at all?

The happiest problem of all: Finding things to do. If you like work and don’t see the boss pushing you out the door right at 65, why not stick around and be productive?

Or perhaps become a consultant in your line of business and keep a part-time income going. The money you make in those crucial few years could allow your retirement fund to grow bigger in the meantime.