The average retirement age (1) in the U.S. hit 64.6 for men in 2024, while women retire at an average age of 62.6. This is around three years later than the average retirement age in 1994.<\/p>\n
Changes in Social Security rules (like full retirement age moving later (2)), along with changes in the nature of work, have all contributed to people staying on the job longer. But not everyone wants to work until their mid-60s.<\/p>\n
Must Read<\/p>\n
Let\u2019s pretend, for example, that Bob is 50 years old and really wants to retire at 62. Bob is making $150,000, he\u2019s got $500,000 saved already, and he\u2019s contributing 6% to his retirement investment account with no employer matching contributions. He\u2019s also earning a 7% average annual return.<\/p>\n
So, will he be able to hand in his notice on his preferred schedule and start enjoying life as a retiree? Let\u2019s take a look at the numbers and some expert advice to find out.<\/p>\n
Will Bob have enough invested for retirement?<\/p>\n
Figuring out whether you\u2019re on track to retire doesn\u2019t have to be complicated. It just requires a little math to see how much money you\u2019ll end up with. Bob can calculate the numbers himself using the tools available at Investor.gov (3).<\/p>\n
For now, let\u2019s say Bob is making $150,000 and is putting away 6%. That\u2019s $9,000 per year he\u2019ll add to his 401(k).<\/p>\n
\u201cAt a 7% average growth rate, he would have about $1,281,685 in a retirement nest egg at 62,\u201d Domenick D\u2019Andrea, founder of DanDarah Wealth Management, told Moneywise. \u201cThis is a very nice start to being able to retire at 62.\u201d<\/p>\n
But is it enough?<\/p>\n
\u201cAs we all have different monthly bills and different lifestyles, one man could retire very comfortably on this amount, and one man could overspend and run out of money,\u201d D\u2019Andrea said.<\/p>\n
Bob must look at his income needs in retirement<\/p>\n
Figuring out how much money he\u2019ll end up with is the first step. But as D\u2019Andrea pointed out, his income needs matter, too. Bob\u2019s ability to retire hinges on whether his retirement income from all sources can cover his spending.<\/p>\n
Most experts recommend that you aim to replace around 70% (4) to 80% (4) of pre-retirement income. For Bob, that would mean he\u2019d need around $105K at a 70% replacement rate. He can\u2019t just take all that money out of his 401(k), though. He must pick a safe withdrawal rate.<\/p>\n
The 4% rule<\/a> is commonly used to do that and involves limiting withdrawals to 4% of your balance in year one, then adjusting for inflation. So, a $1,281,685 nest egg would produce $51,267.40.<\/p>\n That\u2019s not enough by itself. Of course, Bob becomes eligible for Social Security at 62 and can supplement his investment account withdrawals with that money. Unfortunately, he\u2019ll shrink his standard benefit by 30% if he claims at 62 when his full retirement age is 67 (2).<\/p>\n Lots of factors go into calculating Social Security, but generally benefits replace around 40% of pre-retirement income (5). However, since Bob gets hit with early filing penalties, let\u2019s assume he\u2019ll end up with around $42K. He\u2019d have about $93,000 total to spend, which doesn\u2019t get him to a 70% replacement rate. And remember, that\u2019s the lower end of the scale as far as expert recommendations go.<\/p>\n If Bob wants to be frugal, it could be doable, but he also must factor in the cost of big expenses like costly private health insurance until Medicare starts at 65.<\/p>\n Read More: Almost 50 with no retirement savings? Here\u2019s why you don\u2019t have to panic<\/a><\/p>\n Upping his savings could help him stay on track<\/p>\n If Bob wants to be sure he has enough, he may need to do better than just saving 6%. Of course, if his employer matches 401(k) contributions, that could help. He could also try to invest more aggressively to earn higher returns, but that would mean taking bigger risks.<\/p>\n Ultimately, since Bob is over 50 and eligible for catch-up contributions (6), and since he wants to retire at a pretty young age, he really should be focused on investing more. An advisor can help him figure out how much he needs if he really wants to be sure he\u2019s ready for retirement.<\/p>\n \u201cI would suggest that you sit down with a financial professional and look at your budget,\u201d D\u2019Andrea advised. \u201cYou should review these numbers at least on a yearly basis to make sure that you are still on target.\u201d<\/p>\n What To Read Next<\/p>\n Robert Kiyosaki issues grim warning for baby boomers. Many could be \u2018wiped out\u2019 and homeless \u2018all over\u2019 the country. How to protect yourself now<\/a><\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n Article Sources<\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see ourethics and guidelines<\/a>.<\/p>\n Center for Retirement Research (1<\/a>); Social Security Administration (2<\/a>); Investor.gov (3<\/a>); JPMorgan Chase (4<\/a>); AARP (5<\/a>); Internal Revenue Service (6<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"The average retirement age (1) in the U.S. hit 64.6 for men in 2024, while women retire at…\n","protected":false},"author":2,"featured_media":228579,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,85,46,266,267],"class_list":["post-526640","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-il","tag-israel","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/526640","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=526640"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/526640\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/228579"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=526640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=526640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=526640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}