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What Is The Optimal Retirement Age? Thumbnail

What Is The Optimal Retirement Age?

I read a great article recently on the topic of when is the right age to retire for your health. I will link the article here and also share the highlights. My version is a short read at 2.5 minutes. 

Some Background:

  • In the late 1800s Germany created the first retirement benefit. The age was 70. The average German lived to 40.
  • This age was shifted down to 65. When the US created Social Security in the 1930s it copied the 65-year requirement. Roughly 60% of Americans lived to 65 at that time.
  • The average life expectancy of Americans is now 76. Also, if you were born after 1960 your Social Security Full Retirement Age is 67. 

More Research:

  • Boston College (my dad’s alma mater) has a Center for Retirement Research.
  • They’ve found if you are healthy at 50 you can expect to live another 23 years “free of disability.”
  • Then you get to look forward to 8 years of “disability.”
  • So, is 73 the magical number for retirement for health? 🤔
  • In 2020, 45% of the American labor force worked in the knowledge industry, like management, finance, business. This percentage was at 6 back in 1935. 

What Does This Mean:

  • I’ve talked before about retirement at 65 just being a random number. Especially as you consider retirement is still a relatively new concept.
  • Based on some of the highlights above, researchers are starting to encourage knowledge-based workers to look at 70 for retirement.
  • Gerontologists have discovered working until 70 does not see a drop off in mental ability. If anything, it helps stave off drops in physical and mental declines.
  • I recall a factoid that showed every year you push off retirement decreases your incidence of dementia by 3.5-4%. 

Other Factors to Consider:

  • Obviously, the above situation does not apply to everyone.
  • People in physically demanding jobs are most likely not going to be able to work until they are 70. At least not in their current position.
  • Also, I don’t know anyone who would take the approach of working right until the age they are going to have a “disability.” Most people would rather retire and enjoy retirement for at least a few years before health issues start creeping in.

Final Thoughts:

  • Again, retirement is a new concept. Just because the industry says you have to retire at 65 does not mean that is right for everyone.
  • I work with a ton of physicians. A recurring comment is to take advantage of life while health permits it. I think there is some wisdom there from their experiences.
  • Maybe, just maybe, there is an approach where instead of retiring at 65, you REWIRE at that age. A rewired life could allow you to stay mentally and physically engaged at work, but on your schedule so you can get the benefits of continuing to work in some capacity while also enjoying parts of retirement.
  • I’ll continue to touch more on this concept but wanted to share some highlights of these findings.

I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.