What Is The Average Retirement Age?
According to the Life Insurance And Market Research Association (LIMRA), 69% of Americans retire by age 66. Between the ages of 61 and 65, roughly 51% of people retire. By age 75, 89% of Americans have left the labor force.
It surprises me that less than 1% of Americans retire before age 50. With the way the Financial Independence Retire Early (FIRE) movement has taken off, as well as the rise of freelance work, you’d think the percentage would be higher.
Additionally, I’ve been writing about retirement since 2009 for Financial Samurai. Tens of millions of readers have read this site since. I’m hopeful that during this time, more people have built more wealth and have been able to retire earlier as a result.
Take a look at this graphic below that shows what age do most people retire in America.
How Do Retirees Manage To Live?
According to LIMRA, the typical American household has approximately $253,200. But most of that is owned by the wealthy.
75% of Americans have less than $100,000 saved, which is consistent with the Economic Policy Institute’s 2013 estimate of $17,000 and the median holding of just $17,500.
Working Part-Time To Supplement Retirement Income
The gig economy makes it possible for millions of Americans to work part-time and supplement or replace a full-time income source, despite the low retirement income figures. I’m pretty sure if all went to hell, I could earn at least $50,000 a year driving for Lyft, assembling furniture for Task Rabbit, and being the friendliest greeter at Walmart. However, if I worked more than 50 hours per week, I wouldn’t really be retired.
What I call “Barista FIRE” is working to earn money for your retirement. You are essentially attempting to fill the income gap between your taxable passive investments and your desired lifestyle expenses or a buffer. You might even be able to get subsidized healthcare if you work enough hours.
Healthcare Expenses In Retirement
Our healthcare insurance is the one expense that really weighs heavily on my wife and I in retirement. For a family of four, we pay a staggering $2,380 per month for unsubsidized healthcare insurance.
Reduce Your Housing Costs To Support Retirement
The key to surviving retirement on a low income is owning a home debt free and having sufficient medical coverage. With health and living expenses taken care of, surviving off just $2,000 a month, while challenging, is doable.
I strongly encourage you to try to limit your housing costs to 10% of your annual gross income. If you do, it becomes much simpler to retire early. If you have children who call you back, they might even come to your aid when things get too hard. That said, raising children can be very expensive.
Even High Earners Struggle To Retire
Earning $300,000 per year is not enough to live a comfortable middle-class lifestyle for people who live in a high-priced region of the country and have a few children. Even at age 50, you won’t be able to retire.
You’ll Stay Busy In Retirement
Although I left full-time work at age 34, I’ve never stopped doing some things here and there to keep busy.
For example, I’ve continued to publish three times a week on Financial Samurai since 2009 out of enjoyment and mental stimulation. Consequently, this website generates advertising revenue to supplement my retirement funds.
You should always maintain your active lifestyle after retirement, regardless of your age when the majority of Americans retire. Most will be fine because most will retire to something, not from something.
Your focus simply shifts from something you’re sick of doing to something that’s much more interesting. If you’re lucky enough to love what you do, then by all means work until the very end!
Reducing The Traditional Retirement Age Of 65
According To New Research New research from Bill Bengen, the creator of the 4% Rule, suggests that we may be able to lower the retirement age by 5-10 years, despite the fact that the majority of people typically retire in their 60s.
Bengen now believes a 5% safe withdrawal rate is appropriate for retirees, allowing workers to retire with 20X their annual expenses instead of 25X.
For many people who are overworked and ready for a change, the prospect of retiring comfortably in your mid-50s is exciting. This age is just right—young enough to enjoy an active lifestyle but old enough to have amassed a significant amount of wealth.
Want to learn more? Take a listen to my conversation with Bill Bengen himself, in which we discuss strategies for earlier retirement and safe withdrawal rates.
Manage Your Retirement More Effectively
Use Empower’s free Retirement Planning Calculator to determine your likelihood of retirement success by running thousands of algorithms on real data. To run your various retirement scenarios, simply go to Planning -> Retirement Planner once you have registered.
There’s no better free tool online to help you track your net worth, minimize investment expenses, and manage your wealth.
Diversification In Real Estate
Real estate is my favorite asset class to help you retire and stay retired. It is a real asset that generates income for retirement and is less volatile.
Why Real Estate Helps Retirement
Look to diversify your real estate investments across the country where valuations are lower, net rental yields are higher, and growth rates may be higher. Due to the work-from-home trend, the global pandemic has accelerated demographic shifts toward lower-cost regions of the country.
Real Estate Platforms To Explore
Check out Fundrise and their eREITs, which offer investors a low-volatility way to diversify their real estate exposure. Income is completely passive, and concentration risk is much lower.
If you are bullish on the demographic shift towards lower-cost and less densely populated areas of the country, check out CrowdStreet. CrowdStreet focuses on individual commercial real estate opportunities in 18-hour cities. Both platforms are free to sign up and explore. I’ve personally invested $957,000 in real estate crowdfunding across 18 properties to earn income 100% passively. I’ve personally invested $300,000+ in Fundrise and Fundrise and CrowdStreet are sponsors of Financial Samurai.
