Must be a valid email address.
Password must be 8-64 characters.
Must be a valid phone number.

Don’t settle.

Live the retirement you want.
Get a free review of your retirement strategy today.
Daily Capital
Home>Daily Capital>Retirement Planning>Defining Retirement: What It Means to You

Defining Retirement: What It Means to You

Sometimes dubbed the gray tsunami, there’s an overwhelming wave of baby boomers headed toward retirement. Nearly 10,000 U.S. citizens are now retiring every day. By 2030, all boomers will be at least 65.

With so many people headed toward retirement age, many wonder what this phase of life actually looks like.

What is Retirement?

Retirement is when individuals decide to permanently leave the workforce. Some people opt for semi-retirement, in which they leave full-time employment but continue working on a part-time basis to earn extra income or stay busy.

The History of Retirement

While most everyone is familiar with retirement today, the concept of retirement is actually fairly recent. A century ago, retirement as we know it now didn’t exist: Most people worked their entire lives, or if they couldn’t continue working in old age, their families provided for them.

This began to change in the 20th century as people began living longer — especially after the Social Security Old Age, Survivors and Disability Insurance (OASDI) program was created by the federal government in 1935. Social Security was designed to provide income for elderly individuals who could no longer perform work.

As the workforce became less agrarian and more urbanized in the years following World War II, companies began offering generous pension plans that allowed employees to retire when they reached a certain age, such as 65. For this reason, 65 soon became known as the retirement age in America as well as many other parts of the world.

However, there is no official retirement age in this country. In fact, recent data shows the average retirement age for women in the U.S. is 63 while the average retirement age for men is 65. Similarly, there’s no official “early” retirement age either, although retiring any time before age 65 is often referred to as early retirement.

Read More: What is Considered “Early Retirement” Age?

How Much Money Do You Need To Retire?

Regardless of how the terms are defined, there’s at least one retirement fact that’s indisputable: It’s impossible to retire without adequate financial resources. In fact, the term “retirement” is sometimes used interchangeably with the term “financial independence” because it takes sufficient savings, investment or pension income, inheritance, Social Security or other assets to become financially independent enough to retire.

So how much money does it take to achieve financial independence and live comfortably in retirement? There’s no one-size-fits-all answer to this question — it will be different for everyone based on factors like desired lifestyle, health condition, life expectancy and region of the country where you will live.

For example, do you want to travel extensively, attend numerous shows and sporting events, eat out often and participate in lots of different hobbies and activities after you retire? If so, you will probably need considerably more in the way of financial resources than someone who plans to live a less-active and less-expensive retirement lifestyle.

Read More: Can You Retire With $1 Million?

You’ll also need to consider what type of legacy you want to leave, whether that means being able to take part in providing for loved ones while you’re still alive, or making sure you are able to leave something behind. For many, an important piece of financial independence includes the ability to be charitable both during retirement and after.

Also, if you are in relatively poor health, you may need more retirement resources in order to pay for higher healthcare expenses after you retire.

Read More: How to Plan for Health Care in Retirement

Location Can Impact Your Retirement Savings

Where you live after you retire can go a long way toward determining how much money you need to retire comfortably. If you decide to live in the rural Midwest, for example, you probably won’t need as much money as if you live in New York, San Francisco or a similar metropolitan area where the cost of living is much higher.

Personal Capital has conducted research to determine the average amount of retirement savings held by households broken down by state. The state with the highest average retirement savings is Connecticut, with an average retirement savings balance of $471,719 (as of June 30, 2020). Connecticut is followed by Alaska ($460,571), New Jersey ($457,156), New Hampshire ($455,477) and Virginia ($431,288).

One the other end of the spectrum, the state with the lowest average retirement savings is Utah, with an average retirement savings balance of $280,214. Utah is followed by Washington D.C. ($305,410), Wyoming ($318,466), North Dakota ($319,224) and Mississippi ($323,561).

Read More: What Is the Average Retirement Savings By State?

Retirement Saving Tips

Making sure you have enough money to retire comfortably when you’re ready requires strategy, planning and discipline. Here are five tips to get you going on the road to a financially comfortable retirement.

  1. Start saving as soon as you can. Time can be the best friend, or worst enemy, of retirement savers. Getting started early allows you to potentially benefit from compounding returns. Here, you earn money not only on the amount of your initial investment, but also on the money that your investment earns. Conversely, the longer you wait to get started, the less you’ll benefit from compounding.
  2. Utilize tax-advantaged retirement plans. These include Individual Retirement Accounts (IRAs) and employer-sponsored 401k plans. These retirement plans enable you to potentially save money on your current taxes while also building a retirement nest egg. Also, your employer might match your 401k contributions on a percentage basis, which is the same thing as a guaranteed, no-risk return on your investment.
  3. Make your retirement savings automatic. With this strategy, sometimes referred to as “paying yourself first,” you will arrange for a certain percentage of your pay to be automatically deducted from your gross wages and transferred into your retirement plan each pay period. Or, you can have a certain amount of money automatically transferred from a checking or savings account into your IRA each month.
  4. Leave your retirement account balances alone. It can be tempting to dip into a retirement account when faced with a financial emergency like a job loss or unexpected large home repair or medical expense. But doing so could jeopardize your ability to retire comfortably later down the road. In addition, there may also be tax ramifications and penalties associated with early retirement account withdrawals.
  5. Envision what you want retirement to look like. Coming up with ideas of what you hope to be doing in retirement can help you figure out how much you need to be saving now. Keeping the end-goal in mind can give purpose to your retirement savings strategy and can keep it from feeling like an obligation and more like a choice.

Retirement Planning Assistance from Personal Capital

Personal Capital can help you devise the right strategy for ensuring a financially secure retirement. You may be qualified to speak with a financial advisor, who can provide more detailed guidance when it comes to devising a personalized retirement saving strategy for you.

Personal Capital also offers professional-grade financial tools for free. Millions of people use this technology to prepare for retirement. With the tools, you can easily:

  • Determine your path to retirement given a wide range of scenarios
  • Learn what your retirement income needs may be
  • Budget and save for your retirement goals
  • Analyze your retirement investments and uncover hidden fees

Ready to get on track to the post-work life you want?

Get Free Tools for Retirement Planning

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Kristen Niethamer, CFP®, is a Financial Advisor with Personal Capital.
Icon Close

To learn what personal information Personal Capital collects, please see our privacy policy for details.

Ask Us Anything

We want to hear from you.

What finance question is burning a hole in your pocket?

Thank you for sharing what’s on your mind!

Our team will be in touch shortly.