Contrary to popular belief, the ideal retirement age isn’t as soon as possible. Retire too soon and you may feel empty for never living up to your true work potential. Retire too late and you might always be left wondering what could have been if you had changed course sooner.
For example, a 35-year-old couple making $400,000 might love their jobs. With two young kids under three, both parents might both want to work for 20 more years. This way, they can maximize their capital and support their kids through college. But will they regret retiring after both kids have left home? Maybe.
Then you might have a 30-year old couple making a combined $80,000. They don’t have kids and don’t want kids. Instead of needing a 4-bedroom, 3-bathroom home, they are happy living in a 1-bedroom condo for much less. All they want to do is travel and lead a simple life. In their mind, the ideal retirement age is 40.
To minimize regret and maximize happiness, I believe the ideal retirement age range is between 41-45. By this age range, most will have had ~20 years to save and invest. Most will also be healthy enough to explore the world and do the things they’ve always wanted.
My Retirement Age
I retired from banking in 2012 at age 34 and mentally unretired by 36 because it was just too boring. There were only so many gothic churches I could see and rounds of golf I could play.
Now I call myself a fake retiree because I’m busy writing on Financial Samurai, sending out weekly newsletters, and recording podcasts (Apple, Google) in between school drop offs and doctors appointments.
My online activities keep me busy for 15-20 hours a week. The other 25-30 hours a week are spent with my wife and kids. Teaching my kiddos new things is now my greatest joy. It’s also a lot of fun for me to relearn all the things I had forgotten in school.
I’m currently 45 years old and have accomplished much of what I’ve wanted to accomplish. But if I were to retire all over again, one of things I would have done differently was try to work for at least three more years. In retrospect, retiring at age 34 was too early.
It would have been nice to have taken advantage of paid parental leave twice. Relocating to a new office in Asia or Europe would have provided a great thrill. Padding my 401(k) and taxable investment portfolio with three more years of profit sharing and contributions would have provided even more financial security.
Oh well! I cannot go back in time. But I can use my experience to help you make a more informed decision about the ideal retirement age. Let’s go through the reasons why the age range of 41-45 makes sense to take things down at work.
The Average Retirement Age In America
To get a retirement age baseline, as you can see in the chart below, the average retirement age is between 61-65 for 51% of Americans. 63% of Americans retire between the ages of 61-69.
In a quest to live a better-than-average life, it’s logical to conclude the ideal retirement age should at least be below 61-65, the majority age range of when Americans retire. Study after study show most Americans are “disengaged” from work. Therefore, most of us would rather retire sooner than later.
18% of Americans retire before the age of 54. Thus, the ideal retirement age should also be under age 54.
Average Retirement Age Trends
In terms of retirement age trends, women are working longer. Men are also starting to work longer again. Take a look at the chart below.
The trend to work longer for men since the early 1990s is probably due to changes in Social Security, pension eligibility, less strenuous work, longer and healthier lives, more educational requirements, and a decline of retiree health insurance.
The constant increase in retirement age for women is likely due to increasing workforce participation plus all the same reasons men face. In a land of equality, I suspect the average retirement ages will eventually converge at around age 65. We’re also living longer.
Now let’s look at factors involved in deciding the ideal retirement age. In my mind, the two biggest factors are life expectancy and overall health.
Factors Involved In The Ideal Retirement Age
Here are some factors to consider before deciding when to retire:
- Length of time spent in school
- Cost of education
- Student loans
- Multiple job changes in a career
- Graduate school
- Children
- Whether you rent or own
- The desire to spend time with aging parents
- Healthcare costs
- Passive income generation
- Net worth
- How much you enjoy your job
- Overall health
- Life expectancy
If you spend a fortune and more of your life on your education, retiring early is a more difficult decision. The same goes for the longer you spend in college post high school. One good goal to have is to work for as many years as you’ve gone to school starting in the first grade.
In order to retire comfortably, I believe one needs about 20X your average annual household income in terms of net worth. You can retire with less, but you’ll always be looking over your shoulder wondering when the boogey man will get you.
Social Security and your passive income should help minimize your drawdown of principal. One positive thing I’ve discovered since leaving work is that you will likely need less than you think in retirement. Therefore, the fear of running out of money in retirement is overblown. You can always do something to make side income.
For those of you lucky enough to have a pension, a pension certainly counts in the equation. Here’s a post I wrote about how to calculate the value of your pension. A pension is much more valuable than you probably realize.
The Ideal Age To Retire
Let us now subjectively talk about the ideal retirement age by various age ranges.
The constant battle we will all struggle with is deciding how much money is enough since there is an endless amount we can make. We’ve got to time it just right so that we get to enjoy our money for a long enough period in retirement, instead of die with too much.
Retiring Between Ages 20 – 30
Unless you’re leaving work to be an entrepreneur or a stay-at-home parent, retiring before 30 is suboptimal, even if you have the money. Your energy and enthusiasm will generally be the greatest at this age. To spend it on a beach doing nothing would be a darn shame.
Further, spending more time getting an education versus working also sounds like a waste of an education. You’re expected to live another 50-60 more years.
The ratio of learning, to work, to leisure is off. Therefore, I highly recommend not retiring before the age of 30. Retiring this young will make you feel listless. Ages 20 – 30 is not the ideal age for retirement.
Retiring Between Ages 31 – 35
Most people only start gaining confidence at work after they’ve hit 30. Before then, you’re mostly a cost center doing your best to learn everything you can about the business. Why else do you think there are no CEOs under 30, except for at startups that have failure rates of over 90%?
Your 30s is a time to leverage all the experience you’ve gained in your 20s to position yourself for greater rewards. Unless you have something very clearly in mind that you want to do in retirement, to retire before the age of 35 is to prematurely truncate your potential.
Even though I retired at 34, I believe 34 is too young. I went through seven years of post-high school education, three of which were done part-time for my MBA. As a result, I feel like I didn’t fully maximize my MBA. Further, it would have been nice to have a kid while working to take advantage of benefits.
Depending on your net worth, retiring early to live in poverty doesn’t make sense. It would be much better to find a more enjoyable job and live a more comfortable lifestyle.
Retiring Between Ages 36 – 40
After five years of seeing what you can do in your 30s, you realize more money and power gets old after a while. You’re still young enough to try something new, but you may be getting squeezed by a mortgage and kids.
Just as 30 was a big age for the motivationally inclined, 40 is equally big because this may seem like your last chance to change your destiny. You’re still young enough to make a big career change.
If you’re burning out, at least you can can conduct some quiet quitting to help you recharge and figure out something new. If you’ve always been working at 120%, taking things down to 80%-100% might feel like a vacation.
By age 40, you have the wisdom and experience to take on new challenges. Therefore, you don’t want to have any regrets by not doing a career pivot. Remember, we’re trying to find the ideal age to retire that minimizes the regret of not trying something new.
Retiring Between Ages 41 – 45 (The Best Age Range To Retire)
You’re likely in your prime earning years, making leaving your job that much harder. But after 20+ years of work, you won’t feel as much shame retiring or taking things down a notch. After all, you’ve been working longer than the time you spent in school.
You’re also starting to feel that life speed is accelerating. 50 is right around the corner! You think more about your mortality because you’re probably less in shape and more injury prone. You start experiencing these random health issues that never used to appear before.
If you are blessed with kids, they are likely still living at home with you. They are growing up fast and by the time turn 18, they will have spent ~80% of their time with you already. Therefore, you may have a growing desire to spend more time with them before they build their own lives.
Thankfully, the one benefit to being an older parent is that you might be able to spend a lot more time with your children. Older parents tend to be wealthier with potentially more time flexibility as senior employees.
If you have enough passive income, then retiring by age 45 is the ideal retirement age. You may have the perfect mix of wealth, health, experience, and confidence. Initially after you retire early, you should lower your safe withdrawal rate to help you adjust during the transition.
By age 45, you are more aware of your mortality due to health issues and more friends and acquaintances passing away. If you retire at 45 and die at 60, as many do, you will at least have 15 years to live as free as possible.
Death Rates By Age In The United States
Below is the latest death rates by age. Between 45-54, the death rate for males is 490. But between ages 54-64, the death rate more than doubles to 1,111. Then between 65-74, the death rate doubles again and so forth.
At around age 40-45, the death rate starts accelerating. Therefore, you ideally want to retire with enough money and enough health to live as long as possible. An early retirement is a hedge against an early death.
Retiring Between Ages 46 – 50
Retiring between ages 46-50 is the second-best retirement age range. The closer you are to 50, the more you may be wondering how you lasted for so long working at a job that doesn’t tickle your soul every day.
Can you truly say the work you do makes a positive impact on society? You’re starting to think much more about your legacy, your mortality, and the purpose of life.
You may also begin to wonder how your life might have been different if you had taken the leap of faith earlier. The fear of regret becomes more prominent if you haven’t taken many risks.
At 50, you personally know more people who have died. As a result, you may be agitating for change. Somewhere between ages 40 – 60 is the best time to start decumulating your wealth. If you’ve saved and invested for the past 20 – 40 years, you will likely die with too much. As a result, it’s best to run some numbers and spend more money while you’re still healthy.
Retiring Between Ages 51 – 60
Perhaps you’ve waited this long because you wanted your kids to get through college. Or maybe you just couldn’t quit the money and the prestige granted upon you after 30+ years of work. Or maybe you are lucky enough to have a nice pension waiting for you.
Whatever the case may be, you better have loved what you did or else you will feel regret having waited until 60 to retire.
After more than 30 years of saving and investing, you should feel financially secure to do whatever you want. If you’ve stayed in good shape, you may feel like now is the time to live it up.
Retiring After Age 61
Not only do you feel a sense of accomplishment for lasting this long, you also feel a great amount of nostalgia. Where did all the time go? You wonder. Hopefully you’re done or almost done paying off all your debt and any children’s education costs.
Further, there just might be a healthy pension waiting for you. At the very least, you can withdraw from your pre-tax retirement accounts penalty free if you wish. Just make sure you do so in a way to minimize taxes. God willing, there should be another 20 years of life left to enjoy. You plan to make the most of it.
Retiring after age 61 is great if you love your job. Some researchers report you will live longer if you retire later. Just make sure you’re not tricking yourself about how much you enjoy work. If you do, you will regret working so long.
The Ideal Retirement Age Range: 41 – 45
Now that we’ve subjectively discussed the ideal age ranges to retire, let’s get a little more objective. I’ve used four variables in my model to come up with the ideal retirement age.
These variables are: Income, Freedom, Potential, Return On Education
The lowest score is a 1. The highest score is a 10.
Going through the variables by age, the ideal age to retire is between 41-45 years old.
If you love your job, then the ideal age range to retire is between 46-60 years old. If you hate your job, then your ideal age to retire is between 36 – 40, if you can. In each case, just make sure to have at least 20X of your annual income saved up before you leave work.
41-45 years old is the optimum retirement age range because you’ve put in your dues and still have enough energy to do something new. At the very least, you’ve minimized regret by no longer having to wonder what if.
Go through a regret minimization exercise every year to help you identify what matters most to you. Be intentional with your time.
Reviewing The Variables For The Ideal Retirement Age
Income: You will have hopefully experienced several good years of making record high income. Therefore, you will have a good idea of whether a high income makes you happier or not.
Freedom: Your freedom level at home depends on your family situation. At work, you should have more autonomy given your experience. If you do end up retiring between 41-45, you may have the best combination of capital and energy to maximize your freedom.
Potential: With ~20 years of experience, reasonably good health, financial security, and still a decent amount of energy, you have maximum potential to do many things. The more experience you have, the more people will respect you too. Further, if retirement doesn’t work out, you’re still young enough to easily get a job again.
Return On Education: Unless you finished getting your PhD in your 30s, you’ve spent enough time getting a return on your education. If you did go to college into your 30s, then the ideal retirement age is probably between 51-60. Again, a good goal is to work longer than you’ve spent in school since the first grade.
The later you retire, the more risk you take on of not doing everything you wanted to do before you die. Retiring by 45 gives you a reasonable good hedge against an early death.
The Best Retirement Age Can Change
When I was 30 in 2007, my goal was to retire in 2017 at the age of 40. I figured, after spending my 20s learning, I should spend my entire 30s earning, saving, and investing. Just 10 more years of work and I’d be set fo life!
I was regularly working 60+ hours a week and disliked it. If I worked until 40, I reasoned that 18 years of work after college was equivalent to 27+ years of work at a 40-hour a week job.
However, I couldn’t last until 40 because I was burned out. As a result, I retired at age 34 in 2012 with about $80,000 a year in passive income. Because I retired so young, I ended up missing out on millions of dollars of upside because a bull market ensued after.
I wish I had enjoyed my job more so I could have worked longer. Or, I wish I could have taken a 3-month sabbatical, recharged, and transferred to a new office in a different part of the country. Or, I wished I could have landed a tech startup job in 2012 and rode the boom.
After all, nobody retires early from a job they love.
Got Lucky Finding A Passion
Thankfully, I had found something more interesting to do. If it wasn’t for Financial Samurai, I probably would have gutted it out until at least 40. Then I would have taken at least a 6-month sabbatical to reassess my life.
I worked in a satellite office that already had two Managing Directors. The only way I’d have been able to get promoted was to move to Hong Kong or New York City. Such a move didn’t make sense due to the large drop in quality of life compared to San Francisco. Therefore, staying in the same role for at least six more years would have left me bored and a little bitter.
Instead, I left at 34 and focused my energy to grow my own site. It is the creation of something from nothing that will give you the most satisfaction. Here’s a post on how to be more creative.
Finally, the severance package was also a key catalyst to leave. Because my severance package provided for about five years of living expenses, it made me feel more comfortable leaving six years earlier than I had originally planned.
Ideally, I should have worked for two more years to get the perfect match. Two more years of savings plus five years of severance would bring me to the ideal retirement age range of 41-45 from a financial standpoint.
If you are unwilling to wait until 41-45 to retire, then please at least negotiate a severance. There is little downside.
What If You Don’t Have Enough Money By The Ideal Retirement Age?
Retiring early may be more difficult because of a bear market. Then again, generating more passive income is easier in a bear market since rates have gone up.
Further, retiring during a bear market is better because your finances will have been battle tested. Conversely, retiring at the tail end of a bull market may be one of the worst times to retire. In a bull market, we tend to lose our discipline an inappropriately extrapolate our extraordinary gains far too out in the future. Beware.
But what if you don’t have enough capital at the ideal retirement age? Do you keep on working until you can accumulate enough capital? Or do you retire anyway because you want to minimize the regret of not pursuing your dreams?
Because time is finite and money is infinite, I think it’s better to retire by a certain age rather than after obtaining a certain amount of capital. To hedge against a disappointing life, take more chances. You can always earn supplemental retirement income. If things don’t work out, you can get a job again.
Staying Busy In Retirement
Instead of doing nothing in retirement, you might find yourself as busy as ever. You will naturally spend more time doing what you enjoy and surgically cut out the things you don’t.
When you’re retired, you’re like a kid in a candy store with an unlimited budget. The only restraint is your energy and time.
Life doesn’t end once you retire. It simply morphs. You can do a lot of fun and productive things after you leave work.
Here are some things I’ve done post-retirement:
- Traveled to 30+ new countries in Europe and Asia with my wife. Angkor Wat, Cambodia was truly amazing.
- Gotten my USTA tennis ranking up from 4.5 to 5.0. This would have not been possible without all the newly found time to practice.
- Became a high school tennis coach and won two Northern California Sectional titles.
- Became a father to two children.
Don’t think about retirement in the traditional sense. Think about retirement as a new adventure once working for money and status is over.
To minimize regret and maximize happiness, work on doing things you want to do every day. It is much more likely you will regret forsaking time for money than forsaking money for time.
Once you reach your 40s, you will start to feel the importance of making every moment count. Even with a family to support, money depreciates in value while time appreciates in value. Find the point where the lines intersect and you will find your ideal retirement age.
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Retire Earlier With Real Estate
The ideal retirement age requires building enough passive income streams. In my opinion, real estate is one of the best ways to generate passive income. Real estate is a tangible asset that is less volatile, provides utility, and generates income.
By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate around $200,000 a year in retirement income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. I believe in the long-term demographic migration trend towards lower-cost areas of the country.
My favorite private real estate investing platform is Fundrise. Fundrise has been around since 2012 and has provided a great way for investors to diversify into real estate and earn passive income.
The Ideal Retirement Age To Minimize Regret and Maximize Happiness is a Financial Samurai original post. FS is one of the largest independently-owned personal finance sites online. All posts are written based off firsthand experience. Join 55,000+ others and sign up for my free weekly newsletter.
