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Choosing when to retire is a significant decision that will have a major impact on your financial security. This is because rules regarding the distribution of 401k funds and Social Security benefits are age-based. The best age to retire varies from person to person, as every retirement age has its benefits and drawbacks. This article will tell you about common retirement ages and important things to consider at each age.
If you’ve had enough of the workforce, and you’ve got a sizable retirement nest egg, you may feel ready to retire at age 55. But accessing your funds could cost you dearly. For instance, if you withdraw any money from your 401k before you’re 59 ½ years old, you’ll be liable for a penalty of 10%. Also, you will have to pay a 10% penalty for IRA distributions taken before the age of 59 1/2. Yet, you’d still be young enough to enjoy trips, events, and family.
Many set a goal to retire at 59 ½ years old. This is often because you are eligible to withdraw funds from your 401k without penalty at 59 1/2. In addition, you still haven’t reached the minimum age for Social Security payouts, which is 62. This retirement age may be right for you if your 401k is substantial enough to support you for the next few years.
Full retirement age (FRA) is 66 or 67 depending on the year you were born. If you delay retirement to FRA, then you will be eligible for your full Social Security benefit. If you still have funds in your 401k, you’ll be able to live off of that in addition to your Social Security and any other funds you have. The drawback to retiring at FRA is that you may not fully enjoy your retirement because of potential health and mobility issues.
If you wait until after 67 to retire, you’ll enjoy an even higher monthly Social Security payout. For every year after 67, you’ll get an 8% increase in benefits. However, you may not enjoy trips, family, and events as much as a younger retiree would.
As you may have gathered, each retirement age comes with its own pros and cons. The best age for you to retire will depend on your retirement aspirations and your financial state. In most cases, the more money you have saved up as you retire, the earlier you can retire comfortably. We hope that this article serves as a helpful guide to help you choose your retirement age.