
How Do You Choose a Retirement Age?
Answer: It depends. For more details, read on.
Rather than answer this question of retirement age in isolation, we feel it is better to answer it simultaneously with choosing a level of portfolio risk and deciding how much to save. These are the three levers savers have for affecting their wealth at retirement.
Understanding the 3 Levers: Portfolio Risk, Savings Rate, Retirement Age
Given a desired retirement spending level, three levers available to reach that level are: changing your portfolio risk, changing your savings rate, and choosing when to retire. Decades of advertising by investment fund companies may have conditioned us to think about investments first, but for many people increasing their savings rate and retiring later can be much more reliable ways to increase income in retirement.
Increasing Portfolio Risk: Diminishing Marginal Impact
Increasing Savings Rate: Positive Impact on Retirement Wealth
Saving more will increase the money available to spend in retirement. However, that does not always make saving more a universal prescription. People’s financial priorities vary. Just as it would be undesirable to have to live in austerity during retirement, it is undesirable to save so much that you must live in austerity now. It is worth educating yourself so you can choose how much to save, such that you can balance living comfortably in retirement with living comfortably now.

Retiring Later: Accumulate More Wealth; Have Less Time to Spend It
Social Security Retirement Benefits: A Key Consideration
(With apologies for the acronyms, jargon, and formulas.) The Social Security Administration (SSA) calculates your Social Security Retirement Income (SSRI) based on your primary insurance amount (PIA), which depends on your 35 highest years of indexed earnings. “Indexed” means the SSA adjusts your historical pay at age 60 and earlier to their current dollar equivalent the year you turn 62. Then it takes the 35 highest years and applies a formula to your Average Indexed Monthly Earnings (AIME)1:
“For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2024, or who dies in 2024 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $1,174 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $1,174 and through $7,078, plus
(c) 15 percent of his/her average indexed monthly earnings over $7,078.”
SSRI is more valuable than people realize because it functions as an inflation-indexed life annuity, which would otherwise be expensive to purchase. People’s precise SSRI amount ratchets up or down from the formula listed above according to whether the recipient started taking them later or earlier than their Full Retirement Age (FRA).

Social Security Full Retirement Age
Americans seem anchored on age 65 as “retirement age.” Most likely that stems from 65 having been the age of eligibility for SSRI for the first several decades of the Social Security system. In 1983, reforms to Social Security to extend its financial feasibility introduced the term “Full Retirement Age” and allowed for benefits varying according to whether a person filed for benefits before or after FRA. For people born 1960 and later, their FRA is 67. While you can begin receiving SSRI as early as age 62, you will receive a lower amount.
The table below lists the multiplier that increases or decreases your SSRI according to when you file to receive it.

Consider a person whose SSRI at FRA would be $3,000. He may start it as early as age 62, albeit at only $2,100, or as late as age 70, at $3,720.
From the SSA’s perspective these factors are roughly policy neutral. In other words, considering time-value of money and people’s expected survival rates, whether people take benefits early or late should not make any difference to the financial soundness of the system itself.
Another consideration of SSRI is that, since it comes with cost-of-living adjustments (COLAs), its amount may change each year according to a measure of inflation.
Even if you retire early at age 62 and receive only 70% of what you could have received had you waited until age 67, your SSRI will adjust each year ever after according to the COLA applicable to that year, based on inflation measured the previous year. In January 2022, the COLA was 5.9%. In January 2023, it was 8.7%. In January 2024 it will be 3.2%. This means that a person who retired in 2021 with SSRI of $2,100 per month will receive $2,495 ($2,100 * 1.059 * 1.087 * 1.032 = $2,495) starting in January 2024.
Integrating Social Security with the Three Levers
The GuidedChoice Advisory Service allows you to scenario plan. Once you decide how much you aim to spend in retirement, consider your base of SSRI to determine how much you need to supplement it with withdrawals from your retirement portfolio. The earlier you take SSRI, the more you will require in withdrawals, and vice-versa.

However, the later you begin withdrawals, the more the balance has time to grow, due to contributions and investment returns.
If your current savings rate and portfolio risk project a retirement spending level below what you would like, you may play with any of the three levers of savings rate, risk level, and time (retirement age), until you reach a plan that appeals to you.
Additionally, you can target other spending levels and see how those plans work for you.
The right combination of all these choices may be unique to you.
If you enjoy other types of retirement benefits such as defined benefits and annuities, our tool invites you to enter those details to enrich your scenario planning.
Health, Lifestyle, and Ability to Work as Long as You Want
If you know you or your spouse have significant health issues, those may well play a role in how you plan. You do not have to delay Social Security until age 70, and you do not have to work until your 70s. Our tool will allow you to establish your plan based on your expectations for your respective lifespans. It populates with average life expectancy by birth year and gender, but you are free to plan differently.
Want to see how much you might have should you wish to continue working well into your golden years? Our tool will help you plan.
Alternatively, if you wish to see how early you can afford to retire at a certain spending level, our tool will help you identify whether it is achievable, and if so, how to get there.
Conclusion: Three Levers or Four?

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