Financial Advisors Say This May Be the Ideal Age to Stop Working

Leaving the workforce for good may sound ideal, but choosing the right time to retire is a complicated decision. The best retirement age often depends on how prepared you are financially.

Empower surveyed more than 1,000 Americans to learn when people think retirement should begin. Here’s what the study found.

What Americans call the “perfect” retirement age

Retirement has traditionally been associated with age 65, but many people step away from work before or after that benchmark. In Empower’s survey, Americans said the “perfect” retirement age is 58.

The same survey also found that respondents viewed 30 as the ideal age to buy a home and 41 as the ideal age to become debt-free.

What retirement looks like in practice

Although 58 may sound appealing, most Americans do not actually retire that early. According to the Center for Retirement Research at Boston College, the average retirement age for working men is 64, while working women retire at an average age of 62.

Many people also leave work sooner than expected. A Transamerica Center for Retirement Studies report found that 58% of Americans retired earlier than planned. Among the main reasons were health problems and job losses.

What financial advisors warn

Stepping away from work early may be attractive, but financial advisors say it is important not to retire before your finances are ready.

“You may end up coming up short [or] not having enough money if you quit work too early,” said Carolyn McClanahan, a CFP and founder of Life Planning Partners, in an interview with CNBC.

Why early retirement can be risky

Retiring in your late 50s can sound like a dream, but it can also create a long financial runway. Someone who retires in their 50s may need to support themselves for 30 or 40 years without a steady paycheck.

Empower says the average American has retirement savings of $734,731. For many people, that may not be enough to cover decades of expenses, even with Social Security.

How long your savings may need to last

If you retire before 60, your money will likely need to stretch farther than it would for a more traditional retiree.

The Centers for Disease Control says life expectancy in the U.S. is 81.14 years for women and 76.5 years for men. Actual lifespans can vary, but those figures can help frame retirement planning. For example, a woman retiring at 58 may need to cover at least 23 years of living expenses.

Planning for an early exit

If early retirement is your goal, it helps to take an honest look at your finances. Think about how long your money must last, what resources you have, and what you want retirement to look like.

If travel is part of the plan, estimate how much you would spend on trips each year in addition to everyday costs. A common guideline known as the 4% rule suggests having 25 times your annual expenses invested for retirement. So if you expect to spend $100,000 a year, you would need about $2.5 million invested for a standard retirement horizon.

You should also think about whether you would be willing to work part-time. Many older Americans do so to help cover expenses, which can make retirement savings last longer. A part-time job or second career could expand your options.

Long-term care is another major factor. The cost of care can disrupt even careful retirement plans. The Office of the Assistant Secretary for Planning and Evaluation expects that 70% of adults who reach age 65 will eventually need long-term care, so those costs should be included in your planning.

If possible, long-term care insurance may help protect against those future expenses.

Signs you may be ready

There is no single perfect retirement age for everyone. In the Empower survey, only 17% said people should meet milestones by a specific age. Retirement readiness depends on the individual.

Possible signs that you may be ready include being debt-free, having a plan for health care costs, and having reliable income that does not come from active work. That income could come from dividends or rental property, for example.

Emotional readiness matters too. Retirement is a major life change, and many people struggle with the adjustment. If you are unsure how you would spend your time, it may help to start thinking now about what life after work could look like.

The takeaway

Choosing when to retire is one of the biggest financial decisions people face. If you are unsure whether you are ready, meeting with a financial advisor can help you evaluate your situation and explore your next steps.

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