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What Is Considered Early Retirement Age?


The common definition of early retirement is any age before 65—that’s when you qualify for Medicare benefits. Currently, men retire at an average age of 64, while for women the average retirement age is 62.

Retiring before the traditional age of 65 can feel exciting and give you something to look forward to. Whether you’re wanting to travel, take up new hobbies, or simply start a new chapter in your life, you’re going to need to have a retirement plan.

Even if you’re one of the lucky few who don’t want or plan to retire, understanding what’s possible is valuable as you enter the later stages of life.

Read More: Guide to Retirement Planning

Early Retirement Challenges

While there is research to show that working longer keeps you healthier and happier, there’s also evidence for the opposing view.

The National Bureau of Economic Research found that “retirement improves both health and life satisfaction,” in part by factoring in the number of people who are forced to retire due to health issues.

Read More: How the COVID-19 Pandemic is Reshaping Retirement

However, the primary challenge is ensuring that you have enough assets to provide an acceptable level of income throughout your remaining years, so you’re financially ready to live without a paycheck.

The average lifespan in the U.S. is just under 79 years. For someone who retires at 55, this means they need to save up at least 24 years’ worth of income, and even healthier individuals who live beyond the age of 79 will need to have an even larger nest egg.

Read More: 5 Steps to Retiring Early

How prepared are you? See how you compare to your peers with this free 401k calculator.

How Social Security Affects Early Retirement

While you’ll become eligible for Social Security at age 62, you won’t qualify for your full monthly benefit amount until a few years later.

For those born from 1943-1954, it doesn’t happen until age 66.

If you claim your benefits by 62, you only get roughly 75% of the full amount, which is adjusted because you’ll be getting checks for a longer period of time.

Spousal benefits can also be decreased if you take your benefit early. Specifically, spousal benefits are reduced to 35% of your full retirement amount, compared to 50% if you wait until at least 66.

If you are healthy and likely to live a long time, delaying Social Security until age 70 can help you get the most value from the system you’ve paid into over your working years.

How Medicare Affects Early Retirement

Medicare benefits start on the first day of the month in which you turn 65.

If you retire before this age, you will need to consider alternative health insurance options. You could explore if your former insurance plan will keep you grouped with the actively employed population as a retiree. (This is a typically rare yet lucrative benefit these days.)

Other options are COBRA, Health-Share, or joining your spouse’s plan if they are still working.

Weigh your health insurance options to see which works best for you until your Medicare coverage begins.

How Your Savings Affects Early Retirement

If you have sufficient savings, retiring early may be more achievable than you think. Why? Many people assume their retirement money is off-limits until they reach age 59½, but a special rule in most 401k plans allows penalty-free withdrawals from age 55 – 59½ — but only if you retire after your 55th birthday.

If you still have money in your 401k plan from a former employer, and assuming you weren’t at least age 55 when you left that employer, you’ll have to wait until age 59½ to start taking withdrawals without penalty.

Additionally, if you have old 401ks rolled into your current 401k before you retire from your current job, you will have access to these funds penalty free when you retire from your current job.

As you save for retirement, it’s important to diversify your savings. Most people focus on filling up their 401k bucket, but remember you don’t want to neglect taxable or Roth (when possible) savings. Putting money in different account types (pre-tax, taxable, post-tax) can help you retire before age 59½. It will also offer flexibility and possible tax savings if you can be strategic about the account types you withdraw from in retirement.

Read More: Types of Retirement Plans for Individuals

Suggested Next Steps for You

Many people can’t wait for the day when they finally call it quits on their careers. Still, constantly worrying about finances isn’t exactly the way to spend your later years.

You can take a few actions now to get yourself on the right track.

Download 65 Ways to Retire Smart, an actionable guide with insights from fiduciary financial advisors. The guide is free.
Project your retirement readiness with the free Personal Capital Retirement Planner. You can also use the personal finance tools to track your spending and cash flow, analyze your portfolio, and track your net worth over time.
Consider speaking to a fiduciary financial advisor about your retirement plan.

Sign Up for Personal Capital’s Free Financial Tools

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