Financial Reasons to Retire at Age 65

Although many people like to plan for an early retirement, in a financial sense, it may not be the wisest decision. The reason is that there are several financial benefits gained by a person when retiring at the full retirement age, which is generally accepted as 65 years. Thus, even with a generous early retirement plan, it may be worthwhile to look at the financial benefits of early retirement and the retirement at the age of 65 years as a whole.

Determine the full retirement age

Before considering the financial reasons for retiring at the age of 65, one needs to verify whether his or her full retirement age is 65 years, 67 years of falls in between. In general, if the person was born in 1937 or earlier, the full retirement age is 65 years, and when the person was born in 1960 or later, the age of full retirement is 67. However, when the person was born between 1938 and 1959, the retirement age could fall between 65 and 67 years. Once the full retirement age is determined, it is possible to calculate the financial benefits of retiring at this age against retiring at an earlier date.

Deduction of retirement benefits when withdrawing funds early

One of the main aspects that needs to be looked into in relation to retiring at the age of 65 as against retiring early is the reduction in the social security benefits when such funds are withdrawn earlier. As a worker is entitled to withdraw social security benefits from the age of 62 years, it is natural for anyone to think of using the opportunity as early as possible without considering the consequences it might have in the long run. According to analysts, a person starting to withdraw funds from a retirement benefit scheme at the full retirement age could financially support almost double the time than a person starting to withdraw funds at an earlier age. Thus, it is necessary for a person contemplating early retirement to calculate the actual deduction from his or her retirement benefit, before deciding on withdrawing funds early.

Effect on the retirement benefits by the continued earnings

Another aspect that needs consideration is the influence made by continued income on retirement benefits after an early retirement. For the year 2010 and 2011, a person retiring early can earn up to $14,160 per annum without being subjected to deductions in his or her social security benefits. However, once the earnings pass this limit, the social security benefits will be deducted according to the person’s age. Thus, when making a decision to retire earlier than the full retirement age, one should take time to calculate the actual income for the period up to the full retirement, and estimate the probable loss from the retirement benefits. However, it should be remembered that, once the person reaches the full retirement age and retires, the person could earn any amount without having any deductions from his or her retirement benefits.

Effect on the spouses benefits

Apart from these two issues, retiring early can have an impact on the spouses’ benefits as well. The reason being that, the spouse may not be able to receive the full amount of entitled social security benefits as funds have already been withdrawn partially and the deductions have lessen the already depleted retirement fund.

When looking at these aspects, it is understandable that retiring early could be financially less rewarding than retiring at the full retirement age which is 65 years of age. Therefore, it is best to add up the numbers and determine the actual loss before making a decision to retire early.