When Should I Retire: Average Retirement Age & Post-Retirement Planning in the US

by | Feb 23, 2024 | blog

A recent Gallup poll in 2022 reveals that the average retirement age in the United States now stands at 61, marking a significant shift from the once-typical retirement age of 57 in 1991. The Retirement Confidence Survey of 2023 further substantiates this trend, revealing that both men and women are increasingly considering delaying their retirement until 65, if not later.
Americans nationwide are purposefully postponing retirement to achieve financial stability and avoid dependency. The 2023 Retirement Confidence Survey offers valuable insight, with findings indicating confidence and apprehension.
Nearly 64 percent of American workers express confidence in their ability to live comfortably post-retirement, and 18 percent harbor strong confidence. Simultaneously, a substantial 64 percent acknowledge that preparing for retirement is a source of stress.Financial readiness, lifestyle aspirations, and geographic preferences all play pivotal roles in determining when we can comfortably step into the next chapter of our lives. Balancing these elements is the key to embracing retirement with confidence and vitality. If you are considering investing in your retirement, consult a financial advisor.

Average Retirement Age in the US

Over the past three decades, the retirement landscape in the United States has significantly evolved. Back in 1991, the average retirement age stood at a modest 57. Today, however, there’s a notable shift, with retirees now reporting an average retirement age of 61, showcasing a clear trend of postponement.

Current Trend: Postponing Retirement

This shift towards later retirement is even more evident when we examine the data closely. Between 2002-2007, a substantial 76% of US adults aged 65-69 were already retired. Fast forward to 2016-2022, and we observe a shift, with only 70% in the same age bracket having retired. This signifies a noticeable delay in the retirement phase.

Inflation Woes

In the wake of a surge in inflation during 2021 and 2022, Americans face a harsh reality: the dollar doesn’t stretch as far as it used to. Prices of everyday goods and services are on the rise, putting a significant dent in the purchasing power of retirement savings.

Vanishing Nest Eggs

The investment landscape witnessed an unexpected turn of events in 2022. Both stocks and bonds took a hit, an unusual occurrence as they generally move inversely. An inflation crisis and the ensuing federal interest rate hikes sparked this anomaly. Consequently, the average 401(k) took a notable hit, losing about 20 percent of its value.

This financial setback has left many workers with diminished retirement savings, particularly those in the 55-64 age bracket.

Soaring Costs of Living

As costs balloon, from housing to healthcare, workers believe they need at least $1.8 million to lead a comfortable, financially independent life post-retirement. Census data reveals that over two-fifths of baby boomers in the 55-64 age range have no retirement savings. Many are employed by smaller companies that lack retirement savings plans or are self-employed, struggling to set aside funds for their golden years.

Dwindling Confidence

There’s a growing trend of workers who believe they won’t be able to retire, or at least not in the conventional sense. A joint survey by Axios and Ipsos found that 29 percent of workers under 55 expressed doubts about retiring at all. Among these respondents, a staggering three-quarters cited financial constraints as the primary reason.

Investment vehicles, such as mortgage note investing, can be a strategic move towards a comfortable retirement. Speak with a team member at CWS Investments today to delve deeper into our approach and find out if it aligns with your unique retirement goals.

Post-Retirement Financial Considerations

Deciding when to tap into Social Security is a pivotal step. While eligibility begins at 62, delaying until 70 can yield significant advantages. With benefits increasing by about 8% annually, maximizing taxable earnings over 35 years is essential for securing the highest benefits.

Pension Plans, 401Ks & Other Retirement Benefits

For individuals possessing traditional defined-benefit pensions, understanding the commencement of payouts is pivotal. Consulting the Summary Plan Description (SPD) or a similar document furnished by the plan’s administrator provides this insight. While many plans commence payments at 65, some offer earlier collection options. A critical decision often involves choosing between a lump-sum payment or a series of regular monthly disbursements.

Defined contribution plans, such as 401(k) and 403(b), present flexible withdrawal options. Typically, penalty-free withdrawals can commence from age 59½, with certain exceptions like disability allowing for earlier access. At age 73, mandatory minimum distributions (RMDs) must commence based on IRS guidelines. Between ages 59½ and early 70s, retirees can draw a steady, taxable income from their plans, with compulsory withdrawals afterwards. Consult a financial advisor to confirm these statistics.

Navigating Healthcare and Medicare Coverage

Post-retirement healthcare is a critical facet of financial planning. Budgeting for unexpected medical expenses, especially prescription drugs and hospitalization, demands prudent consideration. Medicare forms the bedrock, but supplementary private insurance warrants exploration to assess coverage gaps accurately.

Most retirees overlook the possibility of long-term care and relocating to an assisted living facility. Long-term care evolves depending on shifting physical and mental capabilities, availability of facilities and involvement of caregivers.

Proactive Budgeting: Safeguarding Financial Security

An EBRI report indicates that approximately 7 in 10 retirees have three months’ worth of emergency savings. These insights underscore the significance of meticulous financial planning, particularly in accounting for unexpected contingencies. Consult a financial advisor.

Here are some practical post-retirement budgeting tips to consider:

  • Planning to save 80% of pre-retirement income, as the US Government recommends, provides a solid foundation.
  • Understanding daily expenses and aligning them with income facilitates effective financial management.
  • Tailoring your retirement lifestyle to your budget can create financial security.
  • Avoiding loans and upfront payments for expenses minimizes the risk of debt, which may safeguard your retirement budget.

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Investment Strategies for a Stable Retirement

By combining diverse investment strategies judiciously, retirees can craft a robust financial plan tailored to their unique circumstances and aspirations. When utilized in concert, these investment vehicles create a comprehensive retirement strategy that can weather the complexities of the financial landscape.

Diversified Portfolio Management

A cornerstone of any retirement strategy, diversification mitigates risk. One can potentially enhance returns by spreading investments across various asset classes like stocks, bonds, and alternative investments while minimizing exposure to market volatility. This strategy aligns with the adage: “Don’t put all your eggs in one basket.

Real Estate Investments

Real estate serves as a tangible and potentially lucrative addition to retirement portfolios. Properties, whether residential or commercial, offer both rental income and potential appreciation in value. Moreover, real estate can act as a hedge against inflation, providing stability in uncertain economic climates.

Individual Retirement Accounts (IRAs)

IRAs provide tax-advantaged environments for retirement savings. Traditional IRAs allow tax-deductible contributions, while Roth IRAs enable tax-free withdrawals in retirement. Choosing between the two hinges on individual tax circumstances and future financial goals.

Employer-Sponsored Retirement Accounts (401(k)s)

Employer-sponsored plans like 401(k)s offer an invaluable avenue for retirement savings. Often, employers match contributions, effectively doubling the impact of one’s contributions. Leveraging these plans not only aids in disciplined saving but also harnesses the power of compound growth over time.

Annuities and Fixed-Income Investments

For risk-averse investors, annuities and fixed-income investments provide stable income streams. Annuities, in particular, offer guaranteed periodic payments, shielding retirees from market fluctuations. Government and corporate bonds also can create reliable returns, making them an attractive option for a portion of one’s portfolio.

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Retiring Early: Is that Financially Viable?

Early retirement, while demanding disciplined financial management, is within reach for those willing to explore these strategies. By tailoring investments to align with individual goals and risk tolerances, individuals can embark on a path towards financial independence and the prospect of retiring on their own terms.

FIRE Movement: Financial Independence, Retire Early

The FIRE movement is a testament to aggressive savings, where individuals allocate between 50% to 75% of their income towards investments. This financial austerity aims to facilitate retirement in one’s 30s or 40s, demanding a steadfast commitment.

The FIRE philosophy transcends mere frugality; it champions an intentional, purpose-driven approach to spending. Adherents meticulously track expenses and prioritize investments that yield long-term benefits over immediate gratification. This mindset can accelerate wealth accumulation and cultivate a deeper appreciation for financial independence.

Furthermore, the FIRE movement encourages individuals to seek supplementary income streams beyond conventional employment. Side hustles, freelancing, or entrepreneurship become integral components of this strategy, augmenting financial stability and hastening the journey towards retirement.

Real Estate and Passive Income

Diversifying investments to include real estate is a pivotal facet of early retirement planning. Residential or commercial properties can offer dual benefits: rental income and potential appreciation, serving as a buffer against inflation and fortifying financial stability.

Real Estate Investment Trusts (REITs)

REITs are an enticing option for those seeking exposure to real estate without hands-on management. These investment vehicles pool resources to invest in diverse real estate assets. Equity REITs, for instance, can offer stable investments in actual properties, providing dividends as income.

Buy, Improve, and Flip

Buying, improving, and selling properties can yield substantial profits. However, it requires a blend of real estate knowledge, home improvement skills, and financial acumen.

Purchase Residential Property and Rent it Out

Acquiring residential property for long-term rentals is a traditional yet effective strategy. The key lies in consistent tenant occupancy and rental rates that cover expenses and generate profit.

Save for Retirement

Establishing a robust savings regimen is a foundational step towards early retirement. Individuals set the stage for financial security by allocating 15% of income to tax-advantaged retirement accounts, such as 401(k)s and Roth IRAs. Consistent monthly contributions and the power of compound growth can significantly impact retirement readiness.

Mortgage Note Investing

Mortgage note investing presents a distinctive approach to wealth generation. Acting as the lender rather than the property owner, investors purchase defaulted mortgage notes, working out repayment plans with borrowers. This strategy, championed by institutions like CWS Investments, aims to provide investors 8-10% annualized returns, distributed monthly, and reduced operational complexities associated with traditional real estate ownership.

The CWS Investments’ approach allows individuals to sidestep concerns related to tenant management, property maintenance, and other logistical challenges. With a focus on risk mitigation, our mortgage note investment opportunities appeal to those seeking stable, real estate-backed returns with lower volatility. This avenue provides an attractive option for diversification within a well-rounded retirement portfolio. Talk with a team member today for more information on our fund opportunities.

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Post-Retirement Lifestyle Choices

In the twilight phase of life, choices abound. By aligning housing, travel, leisure pursuits, and ongoing education with individual preferences, retirees sculpt a lifestyle that’s uniquely their own. Embracing these opportunities with financial independence transforms retirement into a chapter defined by purpose, exploration, and personal enrichment.

Downsizing and Housing Options

Retirement often heralds a shift in living arrangements. Many downsize, trading large family homes for cozier, low-maintenance residences. Condominiums, townhouses, or even retirement communities offer a blend of comfort and convenience. This transition can streamline living space and free up resources for other pursuits.

Exploring alternative housing models, like co-housing or senior co-ops, fosters a sense of community and shared responsibilities. These arrangements can provide companionship and mutual support, enhancing the retirement experience.

Travel and Leisure Activities

Retirement unveils a golden opportunity to explore the world. Whether it’s ticking off items from a bucket list, embarking on cultural immersions, or simply basking in the serenity of nature, travel becomes a cornerstone of post-retirement life.

Moreover, engaging in leisure activities tailored to personal interests enriches this phase. Pursuing hobbies like painting, gardening, or joining local clubs expands horizons and cultivates a vibrant sense of purpose.

Continued Education and Hobbies

Retirement doesn’t mark the end of intellectual growth; rather, it’s a chance to embrace lifelong learning. Universities and community colleges offer a plethora of courses catering to diverse interests. From history to horticulture, the pursuit of knowledge remains boundless.

Likewise, nurturing hobbies introduces new dimensions to daily life. Whether learning a musical instrument, mastering a foreign language, or delving into the culinary arts, hobbies infuse each day with creativity and fulfillment.

Final Thoughts

In life’s tumultuous and unpredictable journey, we don’t always get to choose the timing of our retirement. Health emergencies can unexpectedly lead us down this path. A survey by the Federal Reserve found that for 30 percent of retirees, a health problem played a pivotal role in their decision to retire.

In pursuing a healthy, financially independent post-retirement life, passive investing emerges as a powerful tool. It secures your present and leaves behind a lasting financial legacy for your heirs. This is where CWS Investments steps in, with a portfolio exceeding $75 million and a wealth of experience crafting tailored investment portfolios.

Through mortgage note investments, we offer returns to investors backed by real estate, aiming for low volatility and a low entry cost. This isn’t just an investment; it’s a legacy. Take the first step in securing your financial future with CWS Investments. Speak with a team member today, and embark on your journey towards passive wealth and lasting prosperity!

Frequently Asked Questions (FAQs)

Consult a financial advisor prior to making any investment to ensure your financial future is aligned with your goals and needs.

How common is it to retire at 55?

Retiring at 55 is not the norm. While some achieve it, most retire later, in their mid-60s.

Is $1,000,000 enough to retire at 50?

It can be sufficient if well-managed, but individual circumstances and lifestyle play crucial roles.

Can a couple retire on $1 million dollars?

Yes, with careful budgeting and investment planning, a million dollars can support a comfortable retirement for a couple. Consult a financial advisor to plan for your unique retirement goals.

How much do most people retire with?

The average retirement savings in the US is around $255,000, but this varies widely based on factors like age, income, and financial habits. Consult a financial advisor to plan for your unique retirement goals.