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Is The Average American Retiring Too Early?

Here in the land of the FIRE (Financial Independence/Retire Early) community, you’ve probably read quite a few posts on the awesomeness of becoming financially independent and having the option of retiring early.

From the viewpoint of the community, retiring in your 20’s, 30’s, 40’s or 50’s would qualify as retiring early.

This is because the average person will retire in their 60’s right around when social security benefits will begin.

What if I told you that the average American may actually also be retiring early though?

In order to examine this claim, we’ll have to take a look at the history books.

When Did People Start Retiring?

What may come as a surprise to many people is that this whole concept of retirement is a very new one. For the vast majority of human history, there was no retirement.

You lived, you worked, you died.

If you couldn’t work it was strictly up to yourself, family members or kindness from acquaintances to care and provide for you.

It wasn’t until 1889 when Germany, under Chancellor Otto von Bismarck, passed a new law in which old age social insurance was first implemented.

“Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”

– Otto von Bismarck

Retirement was born.

People finally had a certain time in their lives in which they could expect to receive benefits from the government so that they did not have to work their entire lives.

Now, the version back then is a little different from what we’re accustomed to now – for instance the retirement age wasn’t until 70 – but the groundwork was set.

In 1935 the United States passed its own version of this – the Social Security Act – in which the age to begin receiving benefits was set at 65.

It’s likely here where people began to associate the typical retirement age with the mid 60s.

So, if you’ve been following along, retirement is essentially a modern phenomenon and the age at which it happens has really just been artificially determined by the government that created the benefits program.

Unless you have saved up enough of your own money to retire on your own earlier, you’re pretty much forced to keep working until whatever age the social security benefits begin to kick in.

It’s no wonder the FIRE community is fascinated with the concept of beating the average and retiring before this age (we’re all such rebels!)

The Problem With This

As many people know, the Social Security program has a problem.

Currently it’s projected to be depleted by 2034… just 16 years from now. At that point it would be able to pay just 75% of the benefits it currently offers.

This is an issue that economists have known for a long time. How did the issue come about?

The root of the problem, simply put, is that the law was created in a time when things were a lot different.

Major assumptions that were made in order for Social Security to be successful have become outdated, and the program has not had a major overhaul to adjust for that.

For instance, back in 1935 when social security was introduced, it was proposed to make the retirement age at 60, however, they could not get the math to work at that age and settled on age 65.

Social security was created in a time in which the average life expectancy was 61 years old.

You got that right… the average person back then did not even live long enough to see those benefits.

So where do we stand now?

Currently, the average American lives until they are 79 years old.

If the math didn’t work for a retirement age of 60 when people lived until 61, it’s no wonder there is an issue when the retirement age more or less hasn’t changed (full benefits now start at 67 though you can get partial payments at 62) and people are now living much longer.

Because they are living much longer, they are also receiving benefits much longer than they were originally intended to.

There are a whole other host of issues surrounding social security, but I believe this is the root of it… the current math simply does not support people receiving social security benefits for that long.

Is the Average American Retiring Too Early?

According to the U.S. Census Bureau the average retirement age is 63.

As the full Social Security benefits don’t begin until age 67 (partial benefits kick in at age 62 should you choose that) you may technically be able to say the average American is retiring early!

However, as already mentioned, the government is the one who sets the “retirement age” (when you receive benefits). They’ve been reluctant to massively overhaul the system, and have instead opted to increase the retirement age slightly.

Back in 1935 they chose retirement to be age 65 when the average person was living until 61.

If this was kept proportional to now, since the average person is living until 79, one could argue that the retirement age should actually be 84.

Surely, that is an imperfect argument, many people experience physical and mental decline that would prevent them from working until that age, and it’s not even one that I’m willing to support.

The point remains though; given the current problems with Social Security, the “retirement age” is likely in need of being increased again. Whether that age is increased another year or two, 5 years, 10? That’s for smarter people than me to figure out.

There’s also the issue of political outrage. Who is going to vote for someone that’s going to make them work longer to get the benefits they were promised at age 67?

I certainly do not envy the lawmakers tasked with coming up with a solution, though unless people are satisfied receiving 75% of their benefits in 16 years, it’s one that nonetheless will need to be addressed.

Don’t Stress, There’s A Way Around This

If you’ve gotten nervous reading this, don’t stress, there’s a way to avoid dealing with all this.

An easy way to avoid stressing about the government messing with your retirement benefits is when you don’t depend on that in the first place.

Take your retirement into your own hands.

Avoid debt and live within your means. Have a financial plan and savings goal. Avoid lifestyle inflation and consumer spending that does not bring value.

Over time, by doing these things you will fund your own retirement and get to the point where you don’t have to solely rely on these benefits.

My own FIRE plans do not rely on social security income at all. Who knows what the system will look like in 40 years (when I’m in my 60’s).

While I do think it will still be around in some form, it would be tough projecting that and a lot easier to just assume it won’t be there altogether.

That way, if I do end up receiving something, it would all be a cherry on top to my financial picture!

While this strategy is certainly not easy and takes a lot of discipline, I personally would much rather rely on myself than someone else to fund my retirement.


Do you assume you will receive Social Security benefits when you hit the retirement age? What are your thoughts on the original intent of Social Security compared to how it is now?

14 thoughts to “Is The Average American Retiring Too Early?”

  1. Have to admit, the title caught my eye. Then I realized the average American is not on a path toward early financial independence!

    I am not expecting to receive social security income. I view it similarly to you – it’s a bonus if it happens to still be around by the time I’m eligible and I can receive some benefits.

    People who succeed financially take matters into their own hands. Being prepared is some of the best advice ever given for anything in life, certainly for personal finance. Young people today can’t depend on the social security system to cover most of their retirement income. Those who do are playing with fire (no pun intended!).

  2. No worries, of course you’ll receive social security. Can you name one entitlement system that hasn’t expanded over the last 40 years? Why would you assume that this one will be different. The government after all can print money when it needs it. When they do that they are in effect devaluing what you have saved for retirement so in a real way the funding for keeping full Social Security benefits will come from the money saved in advance by financially independent people. So anyone reading this is going to be helping keep my monthly checks, which I’ll start drawing in less than a decade, fully funded. Thank you so much!

    1. Good point, I prefer to hedge against the unknowns just in case the worst case happens!

      Haha- good point, I guess that’s why they tell everyone to make sure to include inflation in your retirement calculations!

  3. Yeah I’m not counting on Social Security at all. It’ll be awesome to have if it happens! But I’m way more comfortable planning for my own (extended!) retirement instead of relying on something that may not pan out (plus it’s not like I get paid a ton so my Social Security checks won’t be huge anyway 😂).

    Given some articles I’ve seen lately that seem to imply working forever right until we die is what we lazy, entitled millennials should be doing instead of complaining, I’d say some people do maybe think Americans retire too early 😬

  4. I do expect social security to be still in place (it is just too big a support system to let die) but it will likely be drastically different than its current implementation (whether need to be older to have access to it or just less benefits). I treat anything I do get as gravy and really don’t account for it in my retirement plans. The key is to get to a point where you have created a system that will do fine with or without government assistance.

    1. Agreed, it going to have to change in some ways for sure. That’s my plan! I want to get to a spot where I don’t need to rely on that at all, and certainly will before I give up anything and go into early retirement.

  5. I presume that SS will be around in SOME form at the point we will be able to take it, but it is so far off that I’m not factoring it into our plans at this point. I’m pretty conservative with calculations to begin with though, so I’m okay with a bit of extra slush money down the line.

    1. Yes nothing wrong with a little extra down the line! I’m also pretty conservative with my estimates as well as I’d rather plan for the not as good scenarios just in case

  6. Interesting math on life expectancy vs retirement age. Here’s the bigger problem – people may be living longer today, but they’re waaaaaay unhealthier in those last 10 – 20 years. Sure, we keep people alive until they’re 80 but with obesity and all sort of other rampant conditions they’re quality of life is very low on average.

    And life expectancy has been going down slightly in America, for two years in a row. My prediction (I hope I’m wrong) is that the obesity epidemic will continue to lower it.

    1. So true, the last years after they retire many people have failing health. I’m afraid you may be on the something though.. the problems caused by those conditions may be tough to get away from unless the average lifestyles change for the better

  7. Congress will need to reform social security at some point, but they’ll put it off as long as possible. It will be a very unpopular move.
    My FIL uses his social security payment as a donation fund. I think that’s awesome and will try to emulate him when I get there. So 75% would still be fine with me, but not so good for the organizations that need extra support.

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