What is the average retirement age? – Forbes Advisor

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Americans today work longer and retire later.

The median retirement age for men has increased by three years in the past three decades, while the median retirement age for women has risen slightly more over the same period.

Longer life expectancy only goes so far to explain why the average retirement age is rising in the US Experts point to a lack of savings and reduced Social Security benefits as equally important factors.

But the broad averages hide wide variation in retirement options by Americans’ gender, income, education level and race.

Average retirement age by gender

In 1992, the average retirement age for men was 62 and only 59 for women, according to Dr. Alicia Munnell, director of the Center for Retirement Research (CRR) in Boston. College.

Source: Center for Retirement Research at Boston College

The most recent CRR data is from 2021 and represents a slight decline in the average retirement age, thanks in large part to the Covid-19 pandemic. “Women decreased in terms of activity due to covid-19, so it’s not surprising,” says Dr. Munnell.

Many retirees, fearful for their health or anxious to hang up their boots, decided to quit after state governments imposed lengthy business closures.

Average retirement age by education

The CRR data shows that Americans with higher educational levels tend to retire later than those with a high school degree.

Male college graduates retire three years later than those with only high school diplomas. Women also retire later if they have more education, but the story is less clear because many more women entered the workforce during the second half of the 20th century.

Source: Center for Retirement Research at Boston College

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On average, male college graduates retire at age 65.7, while high school graduates retire at age 62.8.

Because the difference?

CRR reported that people with less education generally have poorer health and are therefore more likely to retire due to health problems. Meanwhile, white-collar jobs, which tend to be filled by college-educated people, are less physically demanding, allowing workers to stay employed longer.

Median Retirement Age by Race

White Americans tend to have more assets at retirement than black or Hispanic Americans.

Only 35% of Hispanic families and 41% of Black families have savings in a 401(k) or IRA, according to to the Economic Policy Institute (EPI).

By contrast, 68% of non-Hispanic white families had retirement savings.

Source: Federal Reserve

Despite the lack of savings, minority groups are more likely to retire at earlier ages.

While previous Federal Reserve research did not identify median retirement ages by race, it did report that 56% of Blacks and 65% of Hispanics retired at or before age 61, compared with fewer than half of white retirees.

Common reasons for earlier retirement age were health problems, having to care for family members, and lack of available work.

Median Retirement Age by State

Where you live can affect your retirement age due to available employment opportunities, health care needs, and cost of living.

In general, southern states like Alabama, Georgia, and South Carolina have a lower median retirement age than the national average. By contrast, northeastern states such as Connecticut, New Hampshire, and Massachusetts have higher average retirement ages.

A 2019 MoneyTalksNews survey looked here at the US Census Bureau’s American Community Survey to determine the average retirement age by state. This is what they found:

Source: MoneyTalksNews/US Census Bureau American Community Survey

Factors Affecting Your Retirement Age

While the average retirement age in the US is 63, when you decide to retire depends on many factors:

  • Savings. The average monthly Social Security retirement benefit is about $1,620. For most, that’s barely enough to cover living expenses, which is why they have savings for retirement. Unfortunately, most Americans aren’t saving enough for retirement. Without a substantial pool of savings, you may not be able to retire when you want to, or you may not have enough money to cover your expenses if you are unable to continue working. That’s why so many lower their standard of living once they no longer bring home a regular paycheck.
  • Lifestyle. Your desired lifestyle affects the amount of money you need for retirement. For example, if you want to travel, you’ll need a higher retirement account balance than someone willing to downsize and stay local.
  • Location. If you live in an area with a high cost of living, you’ll need more money to retire comfortably, so you may have to work longer. If you’re willing to move to a less expensive area, you may be able to retire earlier.
  • Health. Your health has a significant impact on your ability to work. If you have chronic or debilitating health problems, you may be able to work as long as you want, requiring you to retire earlier.
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Retirement Planning Tips

Most people are not ready for retirement. While people may have some money set aside, Dr. Munnell stressed that savings amounts were often very modest and inadequate to cover household retirement.

“We look at the Health and Retirement Survey, which is kind of the gold standard,” explained Dr. Munnell. “And we found that two-thirds of people have retirement savings. But a large part of that number has very little [saved].”

To make sure you can retire comfortably, follow these steps:

Start planning for your retirement as soon as possible

The sooner you start saving for retirement, the more time your money has to grow. Starting early in your career, even if it’s just a small amount per paycheck, can have a substantial impact on your ability to retire thanks to compound interest. At the very least, you’ll develop a savings mindset.

As your career advances and your finances improve, make saving for retirement a priority. Michael Kitces, a noted Certified Financial Planner (CFP), recommends saving half of all his future raises.

Take advantage of employer matching contributions

Take advantage of employer-sponsored retirement savings accounts, like 401(k). This is especially true if your employer also contributes to the plan.

According to Vanguard’s How America Saves study, 95% of companies offering employer-sponsored retirement accounts made contributions to employee accounts; 49% of companies offered matching contributions, 10% made complementary contributions, and 36% offered complementary and complementary contributions.

Consider this example:

Let’s say Nicole earns $35,000 a year. Her employer matches 100% of her contributions up to a maximum of 5% of her salary. Assuming she contributes 5% of her salary, she would put $146 a month into her retirement fund. Her employer would match that $146 contribution, giving her a total of $292 in monthly retirement savings.

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Over the course of a year, your employer would contribute a total of $1,752, money that you would lose if you didn’t participate in a retirement plan.

Leveraging employer matching can really pay off. For the sake of example, let’s say that her salary never changed, but Nicole invested the same amount for retirement every month.

If Nicole contributed enough to get the full 5%, her account would be worth $53,420 after 10 years (assuming an 8% annual return). She would have contributed only $17,520 of her own money; Her employer would have put in another $17,520 and the rest of the account would be due to market growth.

Open and contribute to an IRA account

If your employer doesn’t offer a retirement plan, or if you want to increase your retirement fund, opening an individual retirement account (IRA) may be a good idea.

An IRA does not have the advantage of employer contributions, but you can contribute money on your own for your future. Depending on the type of IRA and whether you have access to an employer-sponsored plan, there may also be tax advantages to an IRA.

For traditional and Roth IRAs, the annual contribution limit for 2022 is $6,000. If you are age 50 or older, the contribution limit increases to $7,000.

Consult with a financial advisor

If you’re not sure if you’re on the right track for retirement, talk to a financial advisor. They can help you understand where you stand, how long your money will last, and what changes you need to make to ensure a secure and successful retirement.

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