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 backward 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?
Okay—let’s get the age discussion out of the way. Yes, the average retirement age is 61, but many current workers expect to keep working until age 66.2 Also, many retirees go back to work. Some work part time while others return to full-time work and then retire again in a few years.
In fact, 1 out of 5 retirees said they expect to “unretire” and go back to work this year—many of them to fight the rising costs of living caused by inflation.3 So determining a true average retirement age is really tricky.
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
What Factors Affect Your Retirement Age?
Everyone’s retirement age depends on several different factors . . . but what are those factors, exactly? Let’s talk about a few of the biggest factors that determine when you’ll be able to retire—and what they mean for your specific retirement outlook.
1. Health, Layoffs and Family Reasons
There’s a dangerous myth in the workforce today. People think 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 58% of retirees left their jobs sooner than they planned and only a handful 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.
Some folks get laid off. Others have to take care of a sick spouse or relative. Many folks retire because of their own health problems. For a lot of people, staying in the workforce just wasn’t an option given their circumstances.
2. Savings Rate
Do you know the factor that’s the most likely to determine your retirement success? Hint: It’s not necessarily your investment choices or the rate of return on your investments. Nope! It’s your savings rate.6 It turns out the folks who have enough money saved to retire are the folks who actually put money into their retirement accounts month after month, year after year. What a concept!
But when you’ll be able to retire depends a lot on how much you’re putting away for retirement each month. The more you save, the faster your money will grow (and the sooner you’ll be able to retire). That’s one of the reasons we recommend investing 15% of your gross income for retirement to make sure you stay on track.
3. Amount of Time to Invest
Unless you’re Marty McFly, you can’t go back in time and tell your younger self to start investing for retirement right after college (or put some money on the Cubs to win the World Series). But what you can do is start investing today. There’s a saying that the best time to start was yesterday—but the next best time is now.
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The amount of time you plan to invest and hold on to your investments is called an investment horizon. Time and compound growth can really work together to help your money grow by leaps and bounds if you’re still many years or decades away from retirement! But if you have a shorter investment horizon, you may need to invest more money to play catch-up.
4. Return on Your Investment
When you invest your money, you’re putting those dollars to work and expecting something (growth) in return! But let’s just say some investments work harder than others . . . and then there’s junk out there that looks like an investment but then crashes and burns faster than you can say cryptocurrency.
You want to invest in something with a proven track record of strong returns over time that’ll help you grow your money and outpace inflation. If you just keep putting your money in “safe” investments like bonds or certificates of deposit (CDs) and expect that to be enough to retire on, you’re in for a rude awakening.
We recommend spreading out your investments evenly between four types of good growth stock mutual funds—growth and income, growth, aggressive growth and international—that allow you to add stocks from dozens or even hundreds of companies to your retirement portfolio. That way, you build a diversified portfolio that lowers your risks while still letting you enjoy the growth of the stock market. It’s the best of both worlds!
5. Lifestyle in Retirement
When you retire, do you want to downsize or buy the house of your dreams? Do you want to travel the world or spend lots of time close to home with the grandkids? Do you want to be so outrageously generous that even Warren Buffet would blush? These kinds of questions will help clarify the kind of income you’ll need when you retire and how long it’ll take you to build a nest egg that’ll provide that income.
6. Length of Retirement
It’s impossible to know exactly when you’re going to kick the bucket. But you can still make an educated guess as to how long your retirement will last and make plans based on that.
Most folks retiring today at age 65 can expect their retirement to last roughly 20 years.7 So then you have to ask yourself: Do you have enough money in your retirement accounts to last you two decades of retirement? That’s a question only you can answer.
Obviously, if you want to retire early, you’ll need to stretch out your retirement funds even further—so keep that in mind while you’re planning!
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? It depends.
We tell folks all the time that retirement isn’t an age—it’s a financial number. That means your goal shouldn’t be to retire at a certain age. Instead, your goal should be to identify how much you’ll need in retirement savings to retire on your terms.
But 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!
You can figure out your financial number by using our Retire Inspired Quotient (R:IQ). It’s a free retirement assessment tool that helps you understand how much money you’ll need to retire on your terms. Plus, it also gives you an idea of how much you need to save each month to help you get there.
How Much Should I Save for Retirement?
If you’re out of debt (everything except for the house) and have a fully funded emergency fund in place (with 3–6 months of expenses saved), congratulations! That means you’re on Baby Step 4 and you’re ready to start investing for retirement.
One of the first questions folks ask when they reach this step is how much they should invest for retirement. Here’s the answer: Invest 15% of your gross income in good growth stock mutual funds inside of tax-advantaged retirement accounts like your 401(k) at work and a Roth IRA. This simple game plan has helped millions of Americans secure their retirement future!
Why 15%? Because if you save 15% of your income consistently over time, the math says you will become a millionaire. Here’s the proof: The average household income in America right now is $70,784.8 If you invest 15% of your income, that means you’re investing about $880 a month for retirement.
Now, the S&P 500—which measures the overall performance of the stock market—has an average annual rate of return between 10–12%.9 Which means if you invest $880 each month from age 30–60 and get average returns, you’ll have over $2.4 million in your nest egg for retirement. That’s the power of saving 15%!
This isn’t rocket science or some magic formula, folks. There’s a whole group of millionaires, called Baby Steps Millionaires, who followed Dave Ramsey’s 7 Baby Steps to build wealth over time so they could live and give like no one else. By following the Baby Steps, they were able to pay off all their debt and become millionaires in about 20 years—and so can you!
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 3–6 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 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.10 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—but you can use our investment calculator and plug in your own numbers.
- 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. But 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’ll 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.
Tips for Building Wealth for Retirement
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 and prepare for retirement.
It turns out 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 start to make these eight habits and principles part of your life, you’ll set yourself up for the kind of retirement you’ve always dreamed about!
Work With an Investment Pro
The average American isn’t 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.11 That’s not okay!
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.
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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.