Retirement age is the single most powerful lever in retirement planning. Each year you delay has a triple benefit: one more year of saving, one more year of growth, and one fewer year of withdrawals. Delaying retirement by just 2–3 years can improve plan success rates by 10–20 percentage points.
Retirement age is the age at which you stop working and begin relying on savings and other income sources to fund your lifestyle. It is one of the most impactful variables in retirement planning — far more than most people realize — because it simultaneously affects the accumulation period, the withdrawal period, and the timing of Social Security and pension benefits.
How It Works
Retirement age affects three variables simultaneously:
| Factor | Retire at 60 | Retire at 65 | Retire at 67 |
|---|---|---|---|
| Working years (from age 25) | 35 | 40 | 42 |
| Retirement duration (to age 95) | 35 years | 30 years | 28 years |
| Years of additional saving | — | +5 | +7 |
| Portfolio growth (no withdrawals) | — | +5 years compounding | +7 years compounding |
The compounding effect is dramatic. Five additional years of saving $30,000/year at 7% growth adds roughly $170,000 directly. But the existing portfolio also grows: $800,000 growing 5 more years at 7% becomes $1,122,000 — an extra $322,000 from patience alone.
The retirement duration effect is equally powerful. Funding 35 years of withdrawals requires a significantly lower withdrawal rate than funding 28 years, because the portfolio must survive 7 additional years of inflation, market risk, and spending.
Why It Matters for Retirement Planning
Retirement age interacts with every other planning variable:
- Social Security timing: Claiming at 62 reduces benefits by ~30% compared to full retirement age (67). Delaying to 70 increases benefits by ~24% beyond full retirement age — a 76% total swing.
- Sequence-of-returns risk: A shorter withdrawal period means less time for early bear markets to compound into permanent damage.
- Longevity risk: Reducing retirement from 35 years to 28 years dramatically improves sustainability — success rates for a 4% withdrawal rate jump from ~85% to ~95%.
- FIRE considerations: Early retirees face the longest withdrawal periods and must plan accordingly — typically targeting lower withdrawal rates (3–3.5%) and maintaining higher equity allocations.
A Practical Example
A worker earning $100,000/year, saving $25,000/year, with $600,000 currently saved, targeting $60,000/year in retirement spending:
| Retirement Age | Portfolio at Retirement | Years to Fund | Withdrawal Rate | 30-Year Success Rate |
|---|---|---|---|---|
| 60 | $775,000 | 35 | 7.7% | ~25% |
| 62 | $880,000 | 33 | 6.8% | ~38% |
| 65 | $1,050,000 | 30 | 5.7% | ~62% |
| 67 | $1,170,000 | 28 | 5.1% | ~75% |
The difference between retiring at 60 and 67 is the difference between a plan that almost certainly fails and one that has a good chance of success. Adding Social Security at 67 (reducing portfolio withdrawals) would push the success rate above 90%. Running a Monte Carlo simulation reveals exactly where each individual's tipping point lies.
Frequently Asked Questions
- What is the best age to retire?
- There is no universal best age — it depends on your savings, health, Social Security strategy, pension eligibility, and personal goals. Financially, each year you delay retirement has a triple benefit: one more year of saving, one more year of investment growth, and one fewer year of withdrawals. Even delaying one or two years can meaningfully improve portfolio survival odds.
- Can I retire at 55?
- Yes, but it requires significantly more savings than retiring at 65 because you need to fund 10 additional years. A 55-year-old may need to sustain 40+ years of withdrawals, must bridge the gap until Social Security and Medicare eligibility, and faces higher sequence-of-returns and longevity risk. FIRE practitioners typically target 25-33x annual expenses to retire this early.
- How does delaying retirement improve my plan?
- Each year of delay has three compounding effects: you save and invest more (accumulation continues), your portfolio grows without withdrawals (compounding is uninterrupted), and your retirement duration shortens (fewer years to fund). Delaying from 62 to 67 can improve a borderline plan's success rate by 15-25 percentage points.