Retirement

When can I retire?

Learn how to estimate your retirement timeline by evaluating savings, expenses, and Social Security benefits. Get actionable tips to achieve your retirement goals.

14 minute read • May 05, 2025

Retirement

Planning for retirement

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Deciding when to retire is one of life's biggest decisions. While it might seem as simple as circling a date on the calendar and working toward that, retirement planning is far more nuanced. It's a decision that balances your financial readiness, personal aspirations, and life circumstances.

At its core, retirement timing comes down to this: Do you have enough money to replace a large enough portion of your income so you can have the lifestyle you want?

The following information will help you understand the financial factors behind deciding when to retire.

How much should you save for retirement?

Estimating how much you need to save for retirement is a good starting point for determining when you can retire comfortably.

Financial planners often advise targeting income that will replace 75% to 85% of your current salary once you retire. This estimate assumes retirees spend less on categories like commuting, work attire, payroll taxes, and retirement contributions.

However, this guideline isn't universal. While some retirees spend less on work-related costs, others spend more on travel, health care, or supporting family members. Keep in mind that the type and amount of your expenses may fluctuate throughout your retirement. Ultimately, how much retirement savings you'll need depends on the lifestyle you want, your retirement date, and other sources of income you'll have.

To establish a realistic target:

Consider your retirement goals. What kind of lifestyle do you envision? Someone who plans to travel extensively and spend lavishly on their grandchildren will need a bigger nest egg than a person who envisions days of gardening and fishing at the local lake. Lifestyle choices like downsizing your home and relocating to a less expensive area can also influence how much you need to save.
Estimate retirement expenses. While some costs may fall in retirement, others could rise. For many retirees, health care can be a significant expense you'll want to factor into your plans. And don't forget to account for inflation, which will gradually increase your living expenses over time.¹
Factor in all your sources of retirement income. Social Security benefits, pension income, and other revenue streams, such as rental properties, annuities, or royalties, can make up your retirement income.
Calculate your savings gap. Once you understand your expected expenses, determine how much you'll need to save to support them. Identifying any shortfall you’ll need to cover with your personal savings can help you assess your retirement timeline and savings strategy.

To get a more precise figure for how much you need to retire, consider using a retirement calculator or working with a financial advisor who can provide personalized guidance based on your specific situation.

When should you start planning for retirement?

When to begin planning for retirement depends mainly on where retirement fits into your priorities. Are you focusing on paying off student loans, saving for a house, or managing medical expenses? These competing financial goals may affect how much money you can allocate toward retirement savings.

That said, the general rule is the earlier, the better. Starting early allows you to benefit from compound interest, which Albert Einstein famously called "the eighth wonder of the world." Essentially, it means your investment returns generate their own returns, so your money can grow exponentially over time. Even small amounts can have a big impact over time.

For example, a 25-year-old who invests $5,000 annually could accumulate more than $1 million by age 65 (assuming a 7% average annual return). However, waiting until age 35 to begin the same investment strategy would result in less than half that amount.

Note: This hypothetical illustration does not represent the return on any particular investment and the rate is not guaranteed.

If you're dreaming of an early retirement so you can pursue your hobbies and passions, you may need to start saving earlier and setting aside more than someone content to work into their 60s and beyond. Early retirement requires a larger nest egg. That's because you'll need income for a longer period, and you'll have fewer working years to save and invest.

However, if you feel behind on retirement savings, remember it's never too late to start! If you're age 50 or older and saving within your employer retirement plan account or through an IRA, you can make additional contributions through catch-up provisions. For the 2025 tax year you can contribute an additional $1,000 to an IRA for a total of $8,000.² For a 401(k), you can contribute an additional $7,500 on top of the $23,500 contribution limit.³

How much do most people save for retirement?

Retirement savings can vary widely, but it can be helpful to understand how your savings compare to national averages. According to Vanguard's How America Saves 2025 report, retirement account balances reached record highs in 2024, with the average participant account balance climbing to $148,153 by year-end—a 10% increase from 2023.⁴

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How does Social Security determine when you can retire?

While your overall financial readiness is the primary factor in retirement timing, understanding how and when to claim Social Security benefits can significantly influence your retirement date and lifestyle.

Social Security is a federal government program that provides a guaranteed monthly income. Benefits can be adjusted each year for inflation, and once you begin claiming benefits, they last for the rest of your life. Although it's not intended to be your entire retirement solution, Social Security can play an essential role in helping you create a sustainable retirement income stream.

To qualify for benefits, you generally need to have worked and paid into the system for at least 10 years. Your benefit amount is calculated based on your 35 highest-earning years, making it important to have a consistent work history if you want to maximize your benefits.⁵

What is full retirement age?

Understanding your Social Security full retirement age (FRA) is crucial because it serves as an important reference point for your retirement planning. You're eligible for your entire Social Security benefit when you reach your FRA, which is determined by your birth year. For those born after 1960, the FRA is 67.⁶ Those born before 1960 have an FRA between 66 and 67, depending on their birth year.

Your FRA doesn't dictate when you should retire, but it's an important factor to keep in mind when planning your retirement timeline.

How claiming age affects your Social Security benefits

Your benefits depend on when you start collecting, which can be any time between ages 62 and 70. But the longer you wait to claim benefits, the higher your monthly check will be (up until age 70).

If you claim benefits before your FRA, you'll receive a reduced monthly payment. For example, if your FRA is 67 and you start claiming benefits at 62, your benefit will be 70% of your full Social Security benefit permanently.

On the other hand, if you delay claiming benefits beyond your FRA, your benefit amount increases by approximately 8% per year until age 70. In other words, your benefit will be 24% higher at 70 than at your FRA.

Balancing Social Security with other retirement income

Will Social Security be enough to cover your expenses? In general, no. The program replaces only about 40% of an average worker's pre-retirement income.⁷ The average Social Security benefit in 2025 is about $1,976 per month, which falls short of what many people need for a comfortable retirement.⁸

That means most retirees will still need additional income sources to maintain their standard of living.

To create a sustainable retirement income plan, you'll need to coordinate Social Security with your other retirement income sources, including pensions, retirement accounts, personal savings, and other income streams.

To maximize your Social Security benefits, consider:

Timing your claims strategically

For married couples, there may be advantages to having one spouse claim early while the other delays.

Working while collecting

Be aware that working while collecting benefits before FRA can temporarily reduce your benefit amount.

Tax planning

Up to 85% of your Social Security benefits may be taxable depending on your total income, so tax-efficient withdrawal strategies from your other accounts are important.

When can you get Medicare?

Health care costs represent one of retirement's biggest expenses. Unfortunately, many people don't know how much retirement health care costs and neglect to plan appropriately. Medicare, a federal program that helps pay for retirees' health care expenses, can be a critical retirement benefit. Most people become eligible for Medicare at age 65, regardless of their Social Security FRA.⁹

If you plan to retire before 65, it's important to plan for alternative health care coverage to bridge the gap until Medicare eligibility starts. Some options include:

Continuing coverage through your employer's retiree health benefits.
COBRA coverage from your previous employer (typically available for up to 18 months).
Coverage through a spouse's health insurance plan.
Individual health insurance through the Health Insurance Marketplace.
Part-time work that offers health care benefits.

Understanding potential health care costs and coverage options is essential for accurate retirement planning, particularly if you hope to retire early.

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When can you withdraw from retirement accounts?

Understanding withdrawal rules for different retirement accounts can help you plan your retirement date.

401(k) plans and traditional IRAs

You can begin taking penalty-free withdrawals at age 59½¹⁰. Withdrawals before this age typically incur a 10% early withdrawal penalty, although certain exceptions exist for specific circumstances like first-time home purchases or qualified education expenses. Keep in mind that while distributions from a 401(k) or traditional IRA can be taken penalty-free after this age, they are considered income and will be subject to income taxes.

Roth IRAs

You can withdraw contributions (but not earnings) at any time without penalties or taxes. Earnings can be withdrawn penalty-free and tax-free after age 59½, provided the account has been open for at least 5 years.

Required minimum distributions (RMDs)

Currently, most retirement accounts (except Roth IRAs and Roth 401(k) plans) require you to start taking minimum distributions by April 1 of the year you reach 73.*¹¹ Failing to take RMDs can result in a 25% penalty (or 10% if the RMD is corrected within 2 years).¹²

Your retirement withdrawal strategy is as important as your saving strategy because it can help you keep more of your savings.

Common retirement mistakes to avoid

As you plan your retirement timeline, be aware of these common pitfalls:

Underestimating health care costs

Health care expenses can consume a significant portion of your retirement budget. Plan for Medicare premiums, supplemental insurance, out-of-pocket costs, and potential long-term care needs.

Not having a diversified investment portfolio

An overly concentrated portfolio increases risk, especially as retirement nears. By spreading your investments across different asset classes, you can build a portfolio that's more likely to weather market corrections, helping you protect your hard-earned savings.

Withdrawing too much too soon

Taking large withdrawals early in retirement, especially during market downturns, can deplete your savings prematurely. So, ensure your withdrawal strategy accounts for market fluctuations.

Neglecting to review your retirement plan regularly

Your circumstances, your goals, and market conditions will change over time. Review and adjust your retirement plan periodically to stay on track.

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¹Robert Schmidt and Eric Walters. 2024 Milliman Retiree Health Cost Index. Milliman. milliman.com/en/insight/retiree-health-cost-index-2024.

²IRS. COLA increases for dollar limitations on benefits and contributions. Accessed March 23, 2025. irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions.

³IRS. 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000. Accessed March 23, 2025. irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000.

⁴Vanguard. Previewing How America Saves 2025 (PDF).

⁵Social Security Administration. Additional Work Can Increase Your Future Benefits. June 2022. ssa.gov/myaccount/assets/materials/additional-work.pdf.

⁶Social Security Administration. Starting Your Retirement Benefits Early. Accessed March 23, 2025. ssa.gov/benefits/retirement/planner/agereduction.html.

⁷Social Security Administration. Retirement Ready Fact Sheet For Workers Ages 18-48. February 2025. ssa.gov/myaccount/assets/materials/workers-18-48.pdf.

⁸Social Security Administration. What is the average monthly benefit for a retired worker? January 2, 2025. ssa.gov/faqs/en/questions/KA-01903.html.

⁹U.S. Department of Health and Human Services. Who's Eligible for Medicare? Accessed on March 23, 2025, at hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html.

¹⁰IRS. 401(k) resource guide – Plan participants – General distribution rules. Accessed on March 23, 2025, at irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-general-distribution-rules.

¹¹IRS. Publication 590-B (2024), Distributions from Individual Retirement Arrangements (IRAs). Accessed on March 23, 2025, at irs.gov/publications/p590b.

¹²IRS. Retirement plan and IRA required minimum distributions FAQs. Accessed on March 23, 2025, at irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs.

*Due to changes to federal law that took effect on January 1, 2023, the age at which you must begin taking RMDs differs depending on when you were born. If you reached age 72 on or before December 31, 2022, you were already required to take your RMD and must continue satisfying that requirement. However, if you had not yet reached age 72 by December 31, 2022, you must take your first RMD from your traditional IRA by April 1 of the year after you reached age 73.

All investing is subject to risk, including the possible loss of the money you invest.

We recommend that you consult a tax or financial advisor about your individual situation.

When taking withdrawals from an IRA or employer plan account before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

Withdrawals from a Roth IRA are tax free if you are over age 59½ and have held the account for at least five years; withdrawals taken prior to age 59½ or five years may be subject to ordinary income tax or a 10% federal penalty tax, or both. (A separate five-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.)