Have you ever considered that 65 is not necessarily an ideal retirement age, especially in 2023? Depending on your current financial situation, 65 may not be the best age to retire.
Things have changed since the 19s and 20s when the traditional retirement age was set. The prices of goods and products were low, social security was enough to survive, and life expectancy was short.
Today you must rely on more than just a single source of income and think of living comfortably after retirement. With the rising cost of living, having more money when you retire makes more sense.
Let's look at the top 10 reasons why 65 is no longer an ideal retirement age.
1. Longer Life Expectancy
Thanks to better healthcare, people are living longer these days. This is great, but it also means that if you retire at 65, your retirement savings must last much longer.
Imagine if you live until 95 or even 100 – that's 30 to 35 years of living off your savings! You might need to work a few more years past 65 or save up more money to ensure you have enough to live on during all those extra years of life.
The goal is to have a retirement fund to support you until the end.
2. Rising Healthcare Price
Healthcare costs are rising fast. When you retire, you typically need more medical care, so if you retire at 65, a big part of your savings might go toward these expenses. This could even affect how you live during retirement.
Retiring after 65 gives you more time to save for these costs. Plus, if you have health insurance from work, you can keep it longer. So, considering today's healthcare costs, retiring later can be a smart move.
3. Increased Cost of Living
We're living in a world where the cost of life's necessities is continually rising. Due to inflation, bills are getting bigger each year, from groceries to utilities. When you retire, you'll be living on a fixed income, which these rising costs could significantly impact.
If you retire at 65, your retirement savings will need to stretch further and last longer than they did for previous generations.
It's about more than managing day-to-day expenses too. You'll want to enjoy your retirement, travel, and engage in hobbies, all of which become more expensive as the cost of living increases.
4. Inadequate Savings
The harsh reality is that many people don't have enough saved by age 65 to maintain their current lifestyle throughout retirement. This could be due to various reasons, such as high living costs, financial setbacks, or not starting to save early enough.
If you retire at 65 with inadequate savings, you risk running out of money during what should be your golden years.
You could significantly boost your retirement fund by working a few more years. It allows you to catch up on your savings, ensuring a more comfortable and secure retirement.
5. Social Security Insufficiency
Social security benefits are a safety net, but they're not designed to be your only source of income in retirement. They may cover some basic expenses, but as the cost of living increases, these benefits might fall short.
If you rely solely on social security and retire at 65, you may find it challenging to cover all your expenses, let alone enjoy your retirement.
Working past 65 can supplement your social security benefits with additional income from your salary, pensions, or investments, providing a more robust financial safety net for your retirement years.
6. The Desire to Stay Active
For many, work isn't just about earning a living; it's also about staying active and engaged. Retiring can sometimes lead to a feeling of being ‘adrift' without the routine and social interactions that work provides.
If you retire at 65, you may find yourself missing this activity and engagement. Many people work past the traditional retirement age not necessarily for financial reasons, but because they enjoy the sense of purpose and connection it brings.
It keeps them physically active and socially connected and gives a sense of achievement, contributing to overall happiness and well-being.
7. The Need for Mental Stimulation
Work often provides mental challenges that keep our minds sharp. When you retire, especially at a relatively young age, like 65, you might miss the intellectual stimulation that your job provides.
With it, some people find retirement more exciting and challenging. Working beyond 65 can help keep your mind active and engaged.
It can provide mental stimulation from solving problems, learning new things, and collaborating. This contributes to mental health and can delay cognitive decline associated with aging.
8. Delayed Home Ownership
Nowadays, people buy their first homes later in life, often due to high property prices and economic uncertainty. This means that mortgage repayments might still be ongoing by the time you reach 65.
If you retire, you might have to dip into your retirement savings to make these payments. But if you continue working past 65, you can use your regular income to pay off your mortgage without touching your retirement fund.
Plus, once the mortgage is fully paid off, you can redirect that money towards further boosting your retirement savings.
9. Higher Education Costs
Higher education costs have skyrocketed in recent years – many parents wish to support their children through college, which can be a significant drain on finances.
If you retire at 65, you may still have education-related expenses to cover if your children are in college or planning to attend. By working a few more years, you can continue contributing towards these costs without dipping into your retirement savings.
This extra time in the workforce also allows you to save more for your future, ensuring that supporting your children's education doesn't compromise your financial security in retirement.
10. Economic Uncertainty
We live in an era of economic volatility. From recessions to pandemics, various factors can disrupt economies and job markets.
If you retire at 65, your fixed income might not be enough to weather these uncertainties, mainly if they cause inflation or increase the cost of living. Working past 65 gives you a steady income stream for longer and allows you to continue saving and investing.
It also provides a buffer against economic downturns, helping to ensure you can maintain your lifestyle and financial stability throughout retirement, no matter what the economy does.
Time To Rethink Retirement
Retirement should be an exciting life period full of leisure and freedom. However, with current affairs, it's more important than ever to plan and be financially prepared for retirement. It's not rocket science – anyone with a little hard work and planning can enjoy a comfortable retirement even if they retire at 65. So research, plan for the future, and save as early as possible.
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I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.