What Is the Ideal Retirement Age?

May 16, 2023

What Is the Ideal Retirement Age?

May 29, 2023

The French are pissed! Their President Macaroon (OK, Macron) wants his people to work a couple more years (moving the retirement age from 62 to 64) to earn their pension. The French have taken to the streets and even want to ban macaroons.

Putting outrage aside, it's worth noting that when Germany introduced the first national retirement benefit in 1881, it was at age 70, a time when life expectancy was only 40 years. As a result, it did not cost the government much money. Although the retirement age was later reduced to 65 in 1916, most workers still did not live to that age. The U.S. adopted the same retirement age twenty years later, even though only half the population lived to age 65 in 1935.

While I can understand why someone doing back-breaking work feels the necessity to retire in their early 60s, it’s worth noting that half of today’s workforce are knowledge workers. Very few people are toiling on farms or in factories as they did a century ago. Studies have shown that retiring can decrease overall well-being and increase mortality risk by two years due to a lack of purpose, community, and structure. Simply put, you’re not investing in your wellness as much as you did when you were working.

Let’s consider - from a variety of angles - when is the ideal time to retire.

  • Physically: According to Gal Wettstein from Boston College, if we are healthy at 50, we can expect to enjoy around 23 additional years without significant disabilities. So, 73 would seem to be a good target.
  • Cognitively: While our fluid intelligence (the ability to solve complex, linear problems quickly) starts to decline in our 30s, our crystallized intelligence (the ability to synthesize solutions by connecting the dots) improves until our early-to-mid 70s.
  • Emotionally: Our EQ (emotional intelligence) grows with age, as does our ability to create psychological safety and emotional moderation on teams.
  • Socially: All kinds of research show that having work friends makes work more enjoyable, and the most significant emotional risk of retirement is loneliness.
  • Financially: In the U.S., you can start receiving Social Security benefits at age 62, but if you wait till age 70, your annual benefits increase by 77% compared to what you earn at age 62. If you earn $2,000 per month in benefits at 62, you will earn $192,000 (8 years times $24,000 per year) before the person who retires at 70 starts earning benefits. However, that 70-year-old will earn $3,540 per month or $1,540 more each month. Not considering the time value of money, if you think you're going to live past 80 years old (when that 70-year-old catches up with the $192,000 in benefits the 62-year-old started receiving), you probably should wait to receive Social Security until you're 70.

In sum, nearly one-third of 65-69-year-olds are still working compared to just one-quarter just two decades ago. My guess is that Boomers will be growing that number to 50% over the next few years. Four different studies have documented the positive benefits of working or volunteering past the traditional retirement age. Based upon these five ways of looking at it, I would say, on average, that the ideal time for retirement for a white-collar worker would be somewhere between 70-75. Your mileage may vary.

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