When Should You Retire?
Only you know the right answer for you.
Head over to SSA.gov to see what your benefits options are. A quick recap:
Age 59½: You can begin withdrawing penalty-free from traditional IRAs and 401 Ks.
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Age 62: ‘Early Retirement’ The earliest you can claim Social Security, though doing so permanently reduces your monthly payout by 30%. Anytime between 62 and 67 is also early retirement but your monthly payout will increase a bit each month that you delay. You can continue working while receiving early Social Security. There is an annual earnings limit published every year, 2026 is $24,480 ($2,040/month). The Social Security Administration (SSA) will deduct $1 from your benefits for every $2 you earn above this limit. The year you turn 67, the annual earnings limit increases ALOT, 2026 is $65,160, and they deduct $1 from your benefits for every $3 you earn above this limit.
Age 67: ‘Full Retirement Age’ The age at which you are eligible to receive 100% of your calculated Social Security benefit. No annual earning limits, no deductions, and work as much as you want in addition to your full Social Security.
Age 70: ‘Delayed Retirement’ Waiting until this age maximizes your Social Security payments as you get an additional 24%. After this, there is no financial incentive to delay claiming.
Age 65: The age you become eligible for Medicare. Leaving the workforce earlier requires bridging the 3-year gap with private health insurance, an 18-month COBRA plan from your employer, or insurance through your spouse’s employer.
Disclaimer: I am not a certified retirement planner. I am just a slightly salty Gen X pre-retiree that is interested in this topic. Never take financial advice off the Internet. If you need guidance on your specific situation, please seek out professional advice.
Most of the Gen Xers I speak with are interested in early retirement so the rest of this page will focus on this.
Let’s start with an overview of points I find interesting.
According to the Centers for Disease Control and Prevention, the current life expectancy for men is 76.5 years, and for women it is 81.4 years. Take a look at your own personal health and your family history. At what age did your parents and grandparents pass? They may have had good or bad habits that dialed that age forward or backward a bit, but genetics are strong indicators.
Some say there are three phases of retirement, not just one endless open phase. They can be likened to the colors of a traffic light:
The Green Light Years - Between your 60s and early 70s. When you think of retirement, this is the stage that you identify with the most. You are ticking things off your bucket list. Your health is pretty good, and your energy is generally high. You are probably spending more than you thought you would but you are enjoying life.
The Yellow Light Years - Between your early 70s and early 80s. You are not as active as you used to be. Your enthusiasm for traveling begins to wane and perhaps some health issues have popped up. Your spouse and friends may be in the same situation, or in some cases perhaps they have passed on. Your spending habits may decrease during these years.
The Red Light Years - Early 80s and higher. In this final retirement stage, you are a homebody. You may have more medical costs and visits to the doctor, so you don’t stray far. Your spending may increase due to medical costs.
If you retire early, you get to enjoy your green light years. You may be doing it on a budget and with a side hustle, but you get to experience this phase for a full ten years. If you wait until 67, you get to enjoy the green light years with 30% more money, but you get half the time…5 years. If you wait until 70 with an additional 24% income boost, your time is halved again…2 years. And of course we all understand there are no guarantees in life. Men’s current life expectancy is 76.5; 13.5 years after age 62, 9.5 years after age 67, 6.5 years after age 70. Women’s life expectancy is 81.4; 19.4 years after 62, 14.4 years after age 67, 11.4 years after age 70.
Financial advisors can tell you how much money you have left. No one can tell you how much time you have left.
Fear is common amongst all income brackets. Many pre-retirees feel as if only those that have not saved enough are anxious about early retirement. But that isn’t true. Even those that have been able to save $750,000+ in their 401 Ks may be fearful of not having enough money before they go into retirement. Inflation, market crashes, or unexpected medical bills could drain their nest egg too soon. And after they retire they can be worried about spending it too quickly, so they hold onto it and don’t clear out their bucket lists. Many money managers have seen retirees run out of life before they run out of money.
What can you do to lessen your anxiety before you retire?
Have a financial plan in place. You should know roughly how much you will be receiving in Social Security each month. If you are behind in savings, you should have already secured a part-time job, remote work, or a side hustle that will bring your total monthly income up to the level you need to take care of your budgeted needs.
No budget? Use guidance from platforms like TIAA or consult a professional to map out a clear budget that will help alleviate some of your anxiety.
Stockpile your pantry and household essentials prior to retiring. You will sleep easier at night knowing this is in place.
Consider test driving your retirement budget for a few months prior to retiring. Teach yourself to reduce your spending prior to stepping away from your job.
What paperwork do you need for your Social Security application?
Getting your application paperwork gathered will also allow you to feel more prepared and less anxious. You can file for retirement up to four months prior to when you would like to receive your first Social Security benefit check. You will need to provide personal information, work history details, and specific original documents or certified copies. Most states require that you make an in-person appointment in order to start the process.
The Social Security Administration will require:
Your Social Security number
Your original birth certificate or a record certified by the issuing agency
Information about current and former spouses (marriage, divorce, or death dates, plus marriage certificates if applicable)
Names of unmarried children
Bank routing and account numbers for direct deposit
Employer names, addresses, and start/stop dates for jobs held in the current and past two years
Net income from self-employment for the past two years
A copy of your W-2 form(s) or self-employment tax return from last year
Proof of U.S. citizenship or lawful alien status, if you were not born in the U.S.
U.S. military service discharge papers (Form DD-214 or similar), if you served before 1968
At the beginning of this Retire section on the FAWA site, I went through the grisly data of how little money Gen X has been able to save for retirement. So, for a majority of folks in our generation, I predict money won’t be the primary factor for us when we make the decision to retire. We understand that a money fairy won’t be making magical deposits into our bank accounts. And we can clearly see how little we have been able to save over the last few years. Unless we make big changes, we know the next few years will likely be the same.
The final decision to retire is emotional, not just financial. We are burnt out. I predict Gen X will retire early in record numbers. We will not let fear drive our decisions on when to retire. We know we will have a DIY retirement, and we can make peace with that. The last thing I think we will not give up as a generation is our final years of freedom — low key, low-tech, living out in the wild again.
The upcoming FAWA articles will look closer at what it may be like if you retire early with only a little saved for retirement. Can you retire only on Social Security?
Lastly, I can’t leave this page unless I talk about SSA Family Benefits for a moment. Some of us started our families later in life, or restarted families if you got remarried, and still have kids at home. Or perhaps you have guardianship of your grandchildren. Whatever the case may be, please know the Social Security Family Benefits program allows the both the spouse and the children to get up to 50% of your benefits when you file for early retirement at 62. Your spouse receives them until the youngest child turns 16, and your children receive them until they graduate from high school. There are family maximum benefit limits, and hoops to jump through of course. But this essentially doubles your social security check until the kids are out of the house. If this is a lifeline for you, consider coming back to the Tip Jar at the bottom of the FAWA site. You’re welcome. :) www.ssa.gov/family
