Why do so many people retire in their early 60s?

The average age people in the US retire is 62.

Hey facebook it’s friday night live i’m debbie hatch tonight i want to talk to you about the average age that people retire and why that might be so so obviously you’ve got a clue just looking at the title and looking at my title screen that it’s got something to do with age 62 right so the average age that people in the united states retire is 62. the average

Age that federal employees retire is 61. my question is should it also be 62. we’re going to talk about why maybe somebody’s going to think about 62 instead of 61 tonight active duty military members on average retire at 43 they don’t have an age requirement they have to do 20 years to be able to retire so that’s why it’s younger with people that are retiring

From the reserves normally not able to collect their pension until they’re 60 sometimes a little bit sooner based on deployment time but we can see that the average age then across the board is 60 61 and 62. what is that all about well number one maybe one reason that federal employees aren’t retiring at 62 is because they don’t have to federal employees can

Retire under furs or csrs once they hit an age and length of service criteria and there’s eight different ways that people can retire so the first way is called voluntary and with that if the person is 55 to 57 it depends on whether they’re the old system the new system it depends on the year that they were born but 55 to 57 with 30 years of creditable service

They can retire 60 or older with 20 years or more of creditable service they can retire 62 or older with five years of credible service they can retire now there are some provisions if the agency is offering an early out where they could leave at 50 with 20 or any age with 25 if the person has a discontinued service retirement it’s that same thing 50 with 20 any

Age with 25 special provision employees which include federal law enforcement officers firefighters air traffic controllers can go at 50 with 20 any age with 25. now there are some other options that we have available one that’s called mra plus 10 which would allow the federal employee to retire with at least 10 years of creditable service if they were at their

Minimum retirement age and for a disability it requires 18 months of creditable service with no specific age under fers and five years or more of creditable service with no specific age under csrs so we become eligible for our retirements in our 50s that might be one reason that we’re not staying until 62 because we’re eligible well why are we looking at 61 well

Maybe i hit my minimum retirement age for me personally it’s 56 and at 56 i was like oh it feels really nice to know that i could retire if i want to but i’m not actually ready to pull the plug yet and then 57 comes and 58 comes and 59 comes and then i go maybe i should be thinking about it you know i’m going to start that new decade maybe that is a clean break

Where i’m you know starting this new decoration i’m a year in and i go okay now it’s time now it’s time for me to go on with my you know the rest of my life but my question is while federal employees don’t have to wait until they’re 62 should they and one of the reasons that i ask that question is because our pension is calculated by multiplying the creditable

Service by our high three average salary by a formula and different ways of retiring have different formulas csrs is one first is different special provisions is one if you’re not special provisions that’s different disability is one if you’re not going on a disability it’s different but under firs which is the federal employees retirement system that’s been

In place since 1983 the formula changes to once i’m 62 or older as long as i have 20 years of creditable service at that time so i need both of those things i’ve got to be at least 62 and i’ve got to have at least 20 years but if both of those things are true then my retirement is calculated at 1.1 times the high three instead of just one percent times the high

Three so we can look at the numbers and see how much of an impact they have i’ve got a couple of examples here on this one slide it’s a first individual with 25 years of creditable service and a high three of sixty seven thousand eight hundred and thirty three dollars now i’m going to apply the formula based upon how old the person is now because they’ve got over

20 years they’ve got 25 right so in the middle of the slide you can see the person going under 62 is gonna get the one percent so one percent times 25 years is 25 of the high three average salary that person’s pension is 16 958 dollars a year but if this same person with 25 years decided to stay until they were 62 before they retire then they get the 1.1 so 1.1

Times 25 years is 27.5 of the high three and that’s going to bring the retirement up to eighteen thousand six hundred and fifty four dollars a year we can divide by twelve to get the monthly now i’m not saying that they should wait until they’re 62 i’m saying that this is definitely something to consider when i’m making the decision if i go at my mra of 56 and

I have 30 years not only will i get my pension but i’ll also get something that’s called the first supplement for a temporary amount of time i’d get it from my mra until i have my 62nd birthday but i would have retired under the one percent versus if i wait until i’m 62 i get the 1.1 percent but i don’t get that first supplement again that’s for a finite amount

Of time though it does go away so you need to look at the financial benefit of getting that supplement for a couple of years or waiting to get the 1.1 multiplier if you’ve been following me for a little while you also know that i firmly believe that retirement can’t just be about the money you have to consider your quality of life you have to consider what else

You want to do with your life besides working who do you want to spend time around and can you do that while you’re working in your job sometimes people will make a decision to retire because they can’t afford it sure if they keep working they’re going to get more money that’s always going to be the case but they’ve decided that they can get by on what they have

And they’re okay not working to get additional money and that’s fair right life is short you have to think about that too yes you want money to live on in retirement but do you want to example spend another two years working between 60 and 62 so that you can get the 1.1 multiplier maybe maybe not at the bottom of this i had the firefighters and law enforcement

Officers that’s 1.7 for a maximum of 20 and 1 for everything over the top of 20 even if they are 62 they don’t ever get the 1.1 multiplier so we didn’t talk about that and for csrs people it has nothing to do with age either they have a standard formula that isn’t going to change once they’re 62. so i just didn’t talk about that we talked about the fact that

Federal employees might be retiring under 62 because they can right they might stay because they’ll get a bigger pension if they do they might retire under 62 because they have access to their thrift savings program the federal government’s loosely equivalent to a 401k as long as they are in the year that they’ll turn 55 or older when they retire or separate

From the federal government now this might be a surprise to you because a lot of people think it’s 59 and a half it is for a traditional ira and a lot of times we talk about tsp as if it’s an ira but it isn’t it’s an eligible employer account so as long as we are in the year which means we don’t even have to be 55 yet we’re in the year that we’re going to turn

55 or older before we retire or separate we have full access we pay regular income taxes but we don’t have the 10 penalty and for the employees that are covered under special provisions it’s 50 or older that they can access their thrift without that 10 penalty so we have access to this whereas other people if they do have an ira are waiting until they’re 59 and a

Half or older before they can touch it without a penalty so that might cause them to retire a little bit later than a federal employee might choose to retire i think one reason that a lot of people look at their early 60s is because of their social security now our full retirement age for social security ranges from 66 to 67 in so many months it depends on the

Year that we were born regardless though of what our full retirement ages for social security we are all eligible to draw as young as 62. if we sign up under our full retirement age we’re going to have a financial penalty and that will be permanent for the rest of our lives so we might want to or not but we can at 62 access our social security that’s a topic for

Another night we’ve talked about it a couple of times already and i definitely do need to talk about it again just so that people understand how it works for now i’m just saying i could get it at 62 if i want to it does come with a financial penalty and yes that’s permanent for the rest of my life another reason that people might consider retiring 6162 is that

Our medicare part b premiums are based upon our earnings from two years prior to when we sign up so medicare has four parts to it part a is inpatient services you’re paying a payroll tax for that right now there’s no premium for it part b is outpatient in the part that pays the doctor’s bill you’re not paying for that right now that’s as a premium later part c

Is medicare advantage part d is medicare’s prescription drug coverage part b and d have a premium that is based upon our earnings from two years prior to signing up for medicare and we don’t become eligible for medicare normally until we’re 65. there are some exceptions to that but typically we’ve got to be 65. so if i’m signing up for that at 65 and you can see

The rates are going to run from 148.50 a month to 504 dollars a month depending on what my income was two years ago if i’m signing up at 65 then what i have for income at 63 matters if i’m still working and making really good money at 63 but come 65 i’ve already retired they set my rates based on what i was making in 63. same thing if i make a a large withdrawal

From my ira or from my traditional tsp because that counts as taxable wages in the year that i make that withdrawal it can have an impact on what i’m going to have to pay for my medicare part b or part d premiums now i can if i’ve had a change in life events like that i was making all of this money because i’m working and i’m not making it anymore because i’m

Retired now i can go to the social security administration and ask them to review my price i will have to do that they don’t do that automatically for me and i would have to know to do that so i don’t have to i don’t have to agree to this higher price just because i was working a couple of years ago but it is definitely something that i need to be aware of right

Something that i know i need to do if i’ve had some kind of a change in my price so there we go i think this might be like one of only three times i’ve ever kept to the 20 minutes i’m super excited about that if you have some reasons why you think people are retiring at 61 or 62 i would love to hear them what age are you thinking about retiring are you going to

Stick around for the extra 0.1 or are you gonna say it’s okay and just leave at the one percent let me know if you have any questions if you have any suggestions for things that you would like for me to talk about later please drop them in the comments here or go to the website and let me know kathy denny how are you i haven’t seen you on here forever all right

Everyone i am hopping off thank you so much for stopping by take care of yourself have a fantastic weekend kathy is so great to see you

Transcribed from video
Why do so many people retire in their early 60s? By Debbie Hatch