The typical age for retirement has long been considered to be 65, and this is partly because of the rules around Social Security Benefits. When the Social Security program began in 1949, workers were able to receive retirement benefits that were not reduced beginning at the age of 65. The rules gradually changed between 1983 and 2000, when the full retirement age was set to 67. Let’s know Why Hard To Retire 65?
Today, the current Social Security full retirement age is 66 for people born between 1943 and 1959, and 67 for people born in 1960 or later. The full retirement age is not the only thing that has changed, but also the average amount of time someone would spend in retirement due to health care improvements. To decide to retire at 65, you would have to factor in this new trend. Retiring at 65 might be difficult in today’s world especially if you haven’t saved enough, or spent too much money on traveling in your youth, or any of the other reasons listed in this article.
10 Reasons Why Retirement at 65 Could be Difficult
- You Haven’t Saved Enough or Saved Anything at All
Often people make the mistake of thinking that contributing to an IRA or 401(k) will give them enough money when they retire. Only to realize that you may have thought you’ve been fully funding your 401(k), but you’ve only contributed enough to get the company match. Worst case scenario, maybe you haven’t started saving at all and can’t even consider the option to retire. And even if you start saving now, you might never have enough savings in time to retire at 65.
- Your Spouse Passed Away
This is the most unfortunate but not the most uncommon reason for someone to postpone their retirement. Some might prefer having the distraction of going to work and being in the company of coworkers to keep them from getting too lonely. Another downside of having your spouse pass away is that you will only receive one Social Security benefit instead of the two you could have if you were still married in retirement.
- You Rushed to Claim Social Security
Social Security retirement benefits can be claimed as early as age 62, and many people rush to claim as soon as they can. However, many people don’t consider that by claiming early, they lose 30% of the benefit they would have received upon reaching the full retirement age. If possible it is advisable to try and delay claiming until age 70 to receive the full benefit.
- You Cashed In Your 401(k)
Taking money out of your IRA, 401(k), or any other form of qualified retirement plan will result in your retirement savings taking a huge hit. You will have to pay income taxes and are likely to lose 10% of the money in penalties unless you use the money for specific qualifying expenses.
- You Didn’t Contribute To an IRA When You Had the Chance
An IRA or Roth IRA are two investments you can contribute to in addition to an existing retirement plan you have at work. There are different types of IRAs to choose from that could help you enjoy the benefits of savings that grow tax-deferred.
- You Haven’t Paid Off Your Mortgage and Other Debt
Refinancing your home in your 50s or 60s could mean that you’ll be paying for your mortgage well into your 90s. This could have a huge impact on your ability to go on retirement at the age of 65 because you will be entering retirement with debt. In addition to an unpaid mortgage, debt has been on the rise among people aged 50 to 80 years old. Reducing your debt before retirement can help your retirement savings go much further.
- Your Family Still Needs You
Some people, unfortunately, have to postpone their retirement because they still have family that relies on them. Even at 65, you might have a child in college or a parent that requires caregiving you pay for.
- You Took a Risk That Didn’t Pay Off
This happens more often than we think, sometimes people become desperate or concerned about having more money to retire comfortably and can end up making poor investment decisions as a result. The reminder here is that you don’t always have to go big to boost your savings.
- You Didn’t Consider Taxes and Assumed You Wouldn’t Be Taxed on Social Security
When making withdrawals from an IRA or 401(k), the money gets treated as taxable income especially because you didn’t pay any taxes when you invested it. Ensure that you calculate how much taxes you will pay when withdrawing from your IRA. Also, consider the taxes of up to 50% of your Social Security benefit that you might have to pay depending on your marital status and income.
- You Haven’t Mastered the Market
Unfortunately, some people might have the simple bad luck of reaching the age of 65 at a time when the market takes a nosedive and have to postpone retirement so they can save more, whilst waiting for the conditions of the market to improve. If you plan carefully, the negative impact of a downturn might be minimum.
Conclusion: Tips to Help You Retire at 65
The first tip to make retirement at 65 easy is to not retire at 65, but try to hang on until you reach full retirement age according to your year of birth. Secondly, avoid outliving your money by saving more now and taking the necessary steps to increase your savings. Lastly, plan for your retirement, this means more than just investments, but take the time to strategically think about your retirement plans.
