If you’re just curious about the average age people retire, the answer is simple: 61.1
We get why you’d want to know what age most people retire. You can use that as a benchmark and work backwards to figure out how much time you have left to work and save until you can think about retiring.
But here’s the truth: What’s the average retirement age? is the wrong question. That’s because retirement isn't an age, it's a financial number.
When Do Most People Retire?
OK—let’s get the age discussion out of the way. Yes, the average retirement age is 61, but many non-retired people expect to work until age 66.2 Also, many retirees go back to work. Some work part time, while others pursue a second career. Some even return to full-time work and then retire again in a few years.
During the current labor shortage, 20% of retirees say former employers have asked them to return to their jobs.3 So determining a true average retirement age is really tricky.
Market chaos, inflation, your future—work with a pro to navigate this stuff.
Here’s where the average retirement age can get even more muddied. While the average retirement age is 61, most people can’t collect their full Social Security benefits until age 67 (if you were born after 1960).4
Why the Average Retirement Age Doesn’t Matter
Here’s why we say using the average age people retire to target your retirement date is the wrong way to go. There’s a dangerous myth in the workforce today. You’ve probably heard it. You may even believe it yourself. People think that if they have a meager (or nonexistent) retirement fund, they can work past the average retirement age to maintain their income and try to build up their savings. You might have even heard someone say, “They’re going to carry me out of this place in a casket.”
Time to lay down some truth. A recent study found that a whopping 56% of retirees left their jobs sooner than they planned. Only a third retired when they expected to.5
Let’s translate that: You may think you’ll work longer to make up for lost investing time, but you probably won’t. At least that’s what the numbers tell us. While working a couple of years longer may work out for some, it’s not a guaranteed option for everyone.
In talking with people who retired earlier than they wanted, we’ve learned it happens for a lot of different reasons. Some got laid off. Others had to take care of a sick spouse or relative. Many folks retired because of their own health problems. For a lot of people, staying in the workforce just wasn’t an option given their circumstances.
See why we say retirement isn’t an age—it’s a financial number? It’s up to you to figure out what that number is! Once you hit it, age is no longer a factor. That leads us to the million-dollar question . . .
How Much Money Will I Need for Retirement?
If you can retire when you reach a certain amount of money (and not a certain age), then how much will you need? Ready for the answer? It depends. We can’t give you a specific number because we don’t know what your dreams are for your retirement years. Where do you plan to live? Do you want to travel? Do you want to start a business? Do you want to work part time? That’s why one dollar amount won’t apply to every person!
But hey, $1 million would probably do the trick for most of us, right? For The National Study of Millionaires, the largest survey of millionaires ever done, we talked to more than 10,000 millionaires from all across the country to learn more about who they are and what they did to reach millionaire status.
It turns out that most millionaires share similar habits and principles. And that means you can start building those same habits and following those same principles starting today so you can become a millionaire yourself! Here’s the list of million-dollar habits:
- Stay away from debt.
- Invest early and consistently.
- Make savings a priority.
- Increase your income to reach your goal faster.
- Cut unnecessary expenses.
- Keep your millionaire goal front and center.
- Work with an investing professional.
- Put your plan on repeat.
If you’d like a specific, step-by-step plan to becoming a millionaire, we’ve got one! There’s a whole group of millionaires, called Baby Steps Millionaires, who’ve followed Ramsey’s 7 Baby Steps to hit the million-dollar mark. By following the Baby Steps they were able to pay off all their debt and reach a million-dollar net worth in about 20 years.
See? It’s not a pie-in-the-sky goal! If those folks can do it, so can you.
How Do I Figure Out How Much to Save for Retirement?
We’ve created a free investment calculator that can help you figure out how much you need to contribute to your retirement accounts each month to reach your retirement goal. You can put in your current investment totals, how much you’re already investing for retirement, and your expected annual rate of return to see how much you’ll have in your investment portfolio at different ages.
Play around with the calculator to get a feel for the power of compound interest. Once you have your retirement number in mind, you can set your road map and start taking action! Remember, the 7 Baby Steps are the proven plan that millions of people have followed to pay off debt and save for retirement.
- Baby Step 1: Save $1,000 for your starter emergency fund.
- Baby Step 2: Pay off all debt (except the house) using the debt snowball.
- Baby Step 3: Save 3–6 months of expenses in a fully funded emergency fund.
- Baby Step 4: Invest 15% of your household income in retirement.
- Baby Step 5: Save for your children’s college fund.
- Baby Step 6: Pay off your home early.
- Baby Step 7: Build wealth and give.
Am I on Track With Investing for Retirement?
You might be wondering if you’re on track with your retirement savings. Again, the answer isn’t so simple. It depends on how much money you’ve already saved, how much you want to have saved for retirement, and how much you invest every month.
Once you’re debt-free except for the house and have a fully funded emergency fund of three to six months of expenses in place, you should invest 15% of your income in tax-advantaged retirement accounts. Start with your workplace 401(k) and invest up to the company match. Then open up a Roth IRA to invest the rest. If you’ve still got money left over, go back to your 401(k). And if your company offers a Roth 401(k), you’ve got it made—you can invest your whole 15% there.
Now, that’s until you pay off your house. Once you jump that hurdle, you can invest a whole lot more!
We understand that 15% might seem like a lot. But listen, your income is your biggest wealth-building tool. Once you’re out of debt, you’re free to use your income to build wealth. It’s a lot easier to make room for investing when you don’t have payments!
Plus, chances are you can make even more room in your budget. A recent study found that the average American spends almost $18,000 a year on nonessential items like cable subscriptions and eating out.6 Skip the fancier car and nicer wardrobe, and invest in your future instead. You can do this!
Now, even though we can’t get specific about whether you’re on track with your investments, we can give you a scenario, and you can see how your situation might compare. These benchmarks are based on an annual salary of $50,000.
- Ages 25–35: If you’re in this age group, you have the best chance of reaching your financial goal in the shortest amount of time. Start investing as soon as you can. Talk with an investment professional who will work with you for the long term. If you make $50,000 annually, then 15% of your income would be $7,500 a year, or $625 a month. If your income isn’t that high, don’t worry. There are ways to build wealth on a smaller salary. Don’t give up.
- Ages 35–45: If you’re 35 and started investing $625 a month at age 25, you should have around $135,000 in your investment portfolio. If you’re closer to age 45, that number could be near the $550,000 mark. If you haven’t started investing yet, you need to get seriously focused if you want to hit the million-dollar mark. It’s time to start putting first things first!
- Ages 45–55: Gut check time. If you’re 45 and have no retirement savings, you need to invest $900 a month from now until you’re 67 to reach $1 million. That’s the good news—you can still retire on your own terms. You’ll need to slash your budget and make some sacrifices to get there. How much you save for retirement is entirely in your hands.
- Ages 55 and up: Congratulations! If you started investing that $625 a month when you were 25, you should have about $1.7 million in your retirement fund by age 55. If you’re 65, you could have more than $5 million in your nest egg! Now do you understand the importance of investing early?
If you’re over 55 and don’t have much in your retirement fund, you need to rethink your expectations for the future. If you’re able, you need to work as long as possible. It will also help to downsize to a smaller home and lower your expenses. And you need to talk with a financial advisor about how to make the most of the money you can invest and save.
What do you do if your retirement fund isn’t where you want it to be at the age you are right now? You have two choices: Increase your income or decrease your expenses so you can invest more. Increasing your income means taking on extra jobs or switching to a job that pays more. Decreasing your expenses means tightening your budget or even downsizing your home to free up some equity to put in your retirement fund.
The Key to a Better Retirement Age: Go Against the Grain
The average American is not prepared for the future. We don’t know about you, but we’re not content with being average! About a quarter of U.S. households have no money in their retirement savings, and of the families that have some retirement savings, only 40% think their retirement savings are on track.7 That’s not okay!
Work With a Pro
The best way to reach your financial goals is to stay focused on what you want for your future and ignore everything (and everyone) else that might distract you. And those distractions are no joke. You’ll be taking a stand against entire industries that want you to stay in debt, live for the moment, and worry about your future later on.
Go against the grain. Start planning for your future now, not when you have more money or time to invest. Talk to a SmartVestor Pro for help. Work together to set your money goals and create an action plan to reach them. If you make a plan and act on it, you can retire younger than you thought you could.
This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.