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Salary will always be an important factor in any career decision, whether you’re looking for a new job or choosing which offer to accept. And yet, few questions in the job application process are more uncomfortable than the basic What is your desired salary?

Not sure what to put for a desired salary on a job application? Keep reading for both helpful insights and templated responses.

How to Answer Desired Salary on an Online Application

If you’re not sure what to put for desired salary on an application, you likely need to do some research and then think carefully about your answer. It’s true that listing too high a salary can immediately eliminate a candidate if the company can not afford to pay that much. But it’s equally true that lowballing can impact a candidate financially for years.

When deciding what to put for desired salary on a job application, it’s important that candidates don’t simply list the number they want to earn. A salary number should be based heavily on research. Spend time looking into the cost of living in the area, as well as what typical salaries look like for the role, seniority level, and industry you’re applying for. Education level, years of work experience, and special skills should also be taken into account.

When completing an online job application, it’s common to be asked if the salary listed is negotiable. This is usually done in a checkbox format, but if someone is open to negotiation and doesn’t see an option to highlight that fact, there is usually a notes section where flexibility can be mentioned.

Recommended: What Are the Average Monthly Expenses for One Person?

How to Answer the Desired Salary Question in Interviews

Salary requirements can come up at any stage of the application process, including during the interview. To avoid feeling put on the spot, it’s smart to have an answer ready to go beforehand. As nerve-racking as interviews can be, they’re a great time to discuss salary with a potential employer to make sure both parties are on the same page.

Again, a salary number should be backed by careful consideration and research. Be ready to share an argument for why you chose that number. If the applicant is flexible on salary, that can also be expressed here. Many candidates factor benefits, title, signing bonus, growth potential, and other elements into their decision to accept a job.

If a candidate is pitching a number higher than the employer’s budget, but they’re willing to accept a lower salary if they can work from home three days a week, then they should share that during the job interview.

How to Answer the Desired Salary Question in Emails

Some employers may not ask about a candidate’s salary requirements until after an interview or two, and then do so over email. When it comes to figuring out what to put for the minimum salary desired, many candidates list their current salary or a number slightly higher than that to increase their disposable income.

Some employers may ask for a range. Here, it’s important for candidates to choose a minimum salary they feel is worthwhile enough for them to continue the application process.

Candidates may include a note in the email about salary being negotiable if that is true. But if there really is a minimum the candidate needs to see to consider the job offer, they should make that clear in writing. We all have different expenses and budgets that impact how much we need to make. A spending app can help candidates determine what salary they need to pay all their bills.

Recommended: The Most Rewarding Jobs in America

Declaring a Salary by Email: Templates

If you’re feeling uncomfortable about salary negotiations and you’re not sure what to put for the minimum salary desired, it can help to practice writing it out. You can use these email templates as a script for in-person or phone conversations, depending on how either party brings up salary.

•   Template 1: Salary Range. “Based on market research and cost of living in our area, I’m looking for a new role that will pay in the $80,000 to $90,000 range. I am flexible and am open to negotiation, but can only make a move for a salary in that range.”

•   Template 2: Minimum Salary. “The average salary for my role in the greater Los Angeles area is $65,000. I am currently looking for roles that can accommodate a salary of $65,000 or more.”

•   Template 3: Flexibility. “With ten years of industry experience and a recently earned MBA, I am looking to make a move to a more senior position. Compensation is important to me and I would like to make between $100,000 and $135,000. However, I am also looking for a role that provides schedule flexibility and would be willing to discuss a lower salary in exchange for a minimum of three remote work days a week.”

These templates give candidates an idea of how to get started. But it’s important to customize and flesh them out based on your own research.

When to Discuss Salary

Once you decide how much to quote for your minimum desired salary, you also need to be prepared to discuss it. There is really no wrong time to discuss salary during the job application process. While many candidates wait for the employer to bring it up, it is possible for the candidate to jumpstart the conversation. Some employers will wait until they make an offer to even mention salary.

While it’s generally not advisable to try to negotiate a salary before receiving a job offer, it is perfectly acceptable to ask what salary range they have in mind for the role.

If a candidate has concerns that the company’s budget is not in line with the salary the candidate is aiming for, inquiring early on about the salary range can help them avoid committing to multiple rounds of interviews for a role that isn’t the right fit.

What to Put for Desired Salary: Examples

At some point during a job search, a candidate will encounter a request to share their salary requirements. Once you feel confident you know what to put for a desired salary, you can turn to one of these examples for how to format your request.

•   I need to make a minimum of $XX in order to consider making a move from my current role/company.

•   I am looking for a new role that pays in the $XX to $XX range.

•   I am hoping to make $XX in my next role, but am open to negotiation for the right role.

It’s totally fine to keep salary requirements simple and straightforward to help eliminate any miscommunication.

The Takeaway

To recap, when you’re not sure what to put down for a desired salary, you’ll need to conduct market research into standard ranges for that role, industry, and experience level. You may also want to take local cost of living into account. Once you feel confident you know what to put for your desired salary on a job application, you simply need to communicate that amount clearly and concisely.

If you’re looking to make the most of your current or future salary, you can turn to SoFi for help. With SoFi’s money tracker app, users can monitor all of their money in one place. It’s easy to keep an eye on multiple account balances, set goals, review spending by category, and check on their credit score.

FAQ

What should I put for desired salary per hour?

When deciding what to put for your desired salary for an internship, part-time job, or other hourly role, you’ll need to research what the going rate is in your area. You also need to know what number works for your budget.

What to put for desired salary for part-time job?

Not sure what to put for a desired salary for a part-time job? Do some digging online to see what other roles in the same industry and local area pay to get an idea of a fair number to ask for.

Is desired salary hourly or yearly?

Whether or not someone’s desired salary is hourly or annual typically depends on the type of role they’re applying for or the company’s preference. It can be helpful to have a number in mind for both.

Photo credit: iStock/Prostock-Studio

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0323001

Salary negotiation is something that everyone should learn. Increasing your income early in your professional life can help set you up for a more lucrative career, stable finances, and comfortable retirement. And every time you don’t ask for a higher salary or raise, you limit your potential earnings from that moment on.

The fact is, you have little to lose. According to LinkedIn, less than 1% of people reported that a job offer was rescinded after they tried to negotiate their salary. And 80% of those who negotiated saw some increase in their compensation package.

Read on for negotiation tactics and strategies to help you climb higher on the compensation ladder.

Best Salary Negotiation Tactics

To negotiate your salary, you need a well-prepared, data-supported argument as to why you deserve higher pay. The next task is to deliver that argument confidently and convincingly. Here’s how.

Research the National Average Salary

Before you begin the negotiation, check the national and local average salaries for jobs similar to yours. The best sources for this information are Glassdoor, SalaryExpert, Salary.com, Indeed, and the Bureau of Labor Statistics (BLS).

Once you have the data, compare your salary to others’. You may adjust your expectations based on the demand for the type of work you do and the cost of living in your area. The latter is why salaries vary from one region to another.

Pitch to Justify Your Desired Salary

You can use your data on local and national salaries as benchmarks in a pitch for your desired salary. Two major points to cover in your pitch are the cost of living where you work and the demand for your skills.

If you hope to buy a place near your employer, a home affordability calculator can help you assess how much salary you need to live comfortably and own a home.

In New York, for example, your cost of living will be much higher than in North Carolina. Reflecting the economics, an elementary school teacher in North Carolina earns a median annual salary of $50K. In New York, the median annual salary for an elementary school teacher is $88K.

By way of example, nurse practitioners are currently in short supply. According to the BLS, NPs are a fast-growing job, with demand expected to rise by 46% between 2021 and 2031. Compare that to the average growth rate for all occupations of 5%.

If there is high demand for your skills in your area, consider pitching your desired salary at the high end. All other things being equal, you may opt to work for the company that is prepared to pay you the most.

One argument that won’t fly? Stating the salary you need to pay your mortgage and other bills — that’s between you and your spending app.

Decide on Your Salary Range

Before negotiating your salary, decide on the minimum salary you will accept. Let’s say your research showed salaries from $75K to $100K, and you want to earn at least $85K. This advice can apply to recent grads negotiating a good entry level salary or mid-career professionals working toward a promotion.

If you provide a range to an employer or hiring manager, it’s safe to assume that they will negotiate down, so it’s better to state a single number. If your goal is $85K, try asking for $92,250. Being specific implies that you have done careful research and gives you negotiating room. Just be careful not to aim too high or you’ll price yourself out of the market. And if you lowball yourself, chances are you will be unhappy in the position.

Be willing to walk away if the employer does not meet your minimum salary. The company can always come back to you with another offer, and you can always find another employer.

Recommended: Is $40,000 a Good Salary?

Consider Other Benefits

After deciding the minimum salary you will accept, consider other incentives that make a job offer more enticing. The employer might offer perks — such as flexible work hours, generous paid leave, educational opportunities, childcare, excellent healthcare benefits, or stock options — that would make a lower base salary worth it. Thanks to stock options, some 10,000 employees who joined Microsoft in its early years were millionaires by 2005.

Understand Who You’re Negotiating With

Understanding the hiring manager’s position and negotiating style will give you the upper hand and help you choose the right strategy.

According to the Black Swan Group, there are three types of negotiators, and each requires a different approach. This is valuable insight whether you’re negotiating your salary or trying to win a real-estate bidding war.

1. The Analyst

The analyst tends to be realistic and not stirred by emotional arguments. They base their decisions on data. With this type of negotiator, have plenty of salary comparisons to back up your desired salary.

2. The Accommodator

If the person you are negotiating with is friendly and talkative, they may be an accommodator. That means a good emotional argument may sway them. Present your data and comparisons, but also emphasize that your desired salary will ensure you are happy, engaged, and better equipped to do your job.

3. The Assertive Negotiator

This type of negotiator is a no-nonsense, get-to-the-point type of person. They view negotiating as a welcome challenge, so you’ll need to be on your toes. Your data, in this case, will be less effective, so the best approach is to state your demands confidently yet politely and be prepared to walk if they aren’t met. Be willing to revisit negotiations later if you do not succeed with the assertive negotiator the first time around.

Recommended: How to Negotiate a House Price

Wait for a Job Offer to Negotiate Salary

It’s a good idea to delay salary negotiations until you have received a formal job offer. At that point, the employer has invested significant time in making sure you are the best candidate, so they are more likely to acquiesce rather than risk losing you. You can put off the conversation by remaining non-committal about salary until the time comes.

Let the Hiring Manager Make an Initial Offer

Often, a company will either tell you their budgeted salary range or ask you for your desired range. In either case, it’s customary to let the hiring manager make the initial offer before you start to negotiate. This will give you some idea of what you are working with.

Make a case for why you deserve a salary on the higher end of their range. Perhaps you have substantial experience or other skills that are unique to you, in demand, and valuable to the company.

Disclose Your Previous Job’s Salary

Some experts recommend not disclosing your previous salary because companies use it to gauge your worth. However, disclosing your salary gives the hiring manager an idea of what salary you might be expecting. When you start negotiating, you can still make a case for a higher salary based on your research into comparable jobs and your expertise.

Include any benefits you received from your past employer, such as bonuses, stock options, and other perks.

Recommended: Fulfilling Jobs That Pay Well

Discuss Current Job Offers from Other Companies

If you are lucky enough to have multiple job offers, you are in a strong negotiating position. It’s wise to tell a hiring manager you have another offer because it will encourage them to offer more sooner. The fact that you are in demand is proof of your value, and the longer they negotiate with you, the greater the chance that you could accept a competitor’s offer.

Choose an Appropriate Time

The best time to negotiate your salary is once you’ve been offered the position and before you sign a contract. If you are negotiating a pay raise with your current employer, your performance review is a good time to broach the subject.

It helps to discuss a potential pay raise months in advance. That way, you and your manager can agree on what you need to do to earn a pay raise and document it in your performance appraisal. Once you feel you have achieved those objectives, bring up the subject of a raise again and explain why you feel you deserve a raise.

Be Confident

The more confident you are when negotiating your salary or a raise, the more convincing you will be. Hold your head high and make your pitch clearly and without hesitation. Start the conversation off positively, and explain why you think you deserve more compensation. Then give the reasons why. Don’t rattle off a bunch of things, but present one or two data-backed arguments. For example:

“I’m really excited to work here, and I know I will bring value. I appreciate the offer at $63,000 but was really expecting to be in the $70,000 range based on the market and my past performance. Can we discuss a salary of $70,000?”

If all this has whetted your appetite for negotiation, don’t miss this advice on how to be a world-class haggler.

The Takeaway

Negotiating a salary does not have to be nerve-racking. If you have done your research and have identified a fair salary based on the market and your skills, be confident and do not accept anything less. The more in demand your skills are, the more you can ask for in terms of salary.

Remember to consider other perks and benefits when negotiating. Extra time off or stock options may be more valuable to you than an additional few thousand. The worst that can happen is that you decline an offer and move on to another employer who will pay you what you are worth.

SoFi’s money tracker app gives you a bird’s eye view of all your financial accounts in one dashboard. SoFi can help you monitor your spending and saving so you reach your financial goals more efficiently.

FAQ

What are the five basic negotiating strategies?

The five negotiation styles are competition, collaboration, compromise, accommodation, and avoidance. Competitive negotiation uses hardball tactics regarding the other party’s needs. A collaborative style uses a win-win approach and aims to meet the needs of both parties. Compromising is one of the more common negotiation tactics, but the result may be that neither party feels fully satisfied by the outcome. Accommodation is a style used when harm has been done to either party because it requires one party to “accommodate” or make repairs. Last, avoidance means avoiding negotiating entirely.

What are the best negotiation strategies and tactics to use when negotiating your salary?

The best negotiation tactics involve developing a convincing argument by researching the market rates for jobs similar to yours and considering the cost of living and the demand for your skills. Know the personality of the person you will negotiate with and choose a negotiation style that works for them. Next, pick the right time to negotiate and do so confident in the knowledge that you are worth the salary you are asking for.

What are the 4 C’s of negotiation?

The four C’s of negotiation are civility, competition, compromise, and compassion. When negotiating, it’s important to remain civil and avoid conflict by accepting that both sides have a legitimate point of view. It is inevitable that there will be some degree of competition during negotiation; each side wants to win. Compromise is often considered a sacrifice, but this ignores the idea that negotiation is a problem-solving strategy. Compassion contrasts with competition and calls for empathy and appreciation of the other side’s perspective. There must be a balance between competition and compassion in the negotiating process.

Photo credit: iStock/Inside Creative House

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0223005

Have you ever wondered how much it costs to raise a child from birth to 18?

Are you sitting down?

Based on consumer surveys and other data, most estimates these days put the price of parenting just one child at $300,000 or more.

Your costs may vary significantly, of course, depending on where you live, your income, your marital status, and other factors. But it’s probably safe to say that raising a child to college age — and beyond — can deal a real wallop to the budget.

Read on for a breakdown of some of the costs prospective parents can expect.

How Much is the Cost of Raising a Child?

It’s hard to find an “official” calculation for the cost of raising a child.

For many years, parents and prospective parents could get an idea of the costs they faced from the Expenditures on Children by Families report published annually by the U.S. Department of Agriculture. But the USDA stopped updating the report in 2017, so the most recent information is for a child born in 2015.

Back then, the USDA estimated the cost of raising the younger of two children in a middle-income home with married parents would be approximately $233,610 in 2015 dollars.

Today, that number is a bit higher. A 2022 analysis conducted by the Brookings Institution found that parents can expect to spend at least $310,000 raising a child who was born in 2015. That’s for food, shelter, and other necessities, but not college, which for most students starts at age 18 or older.

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What Are Some Average Costs for Raising a Child to 18?

In 2015, the USDA divided the major infant-through-high-school expenses into the following categories:

•   Housing 29% of income

•   Food 18% of income

•   Child care and education 16% of income

•   Transportation 15% of income

•   Health care 9% of income

•   Miscellaneous 7% of income

•   Clothing 6% of income

But remember, those are the USDA’s numbers for one child in an average household with two kids, and those percentages have likely shifted in the past few years. You might end up with a similar allocation, or, based on your own circumstances and priorities, one that’s far different.

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Factors That Can Influence the Cost of Raising a Child in 2023

How much you pay to raise your family may be largely influenced by where you decide to live. In 2022, a mortgage payment was 31% of the typical American household’s income, based on data gathered by Black Knight. But that percentage may look different if you reside in a city or town where housing costs are much cheaper or far more expensive than average.

Child-care costs may vary widely as well, depending on the age of your child and the type of care you choose. Unless you can get Nana and Grandpa involved, be prepared for a hefty bill: 51% of parents who responded to Care.com’s 2022 Cost of Care Survey said they spent more than 20% of their household income on child care every year.

And those costs may not go down when a child reaches school age if he or she attends private school. According to the Education Data Initiative, the average annual tuition among the nation’s 22,440 private K-12 schools was $12,350 in 2021.

Your miscellaneous costs may also be different if your child is involved in sports or other activities that require expensive equipment, camps, or lessons.

Add to that potential healthcare costs, which could depend on the type of insurance you have and your child’s individual needs.

How to Budget for Baby

Considering all the costs involved, it may make sense to start transitioning your budget long before a baby actually arrives. Here are some things to consider if you decide to adjust your household budget categories to fit your growing family:

Stick to Your Savings Goals

You’ve probably heard it a thousand times: A baby will change your life — and your priorities. Still, your own financial security can help determine your child’s future, so it can help to stick with your savings goals, like building an emergency fund (you may need that money more than ever once you have a child), putting money away for a mortgage down payment, and investing for retirement. Then, if you still have room in your budget, you might consider including a 529 education savings account or some other type of investment plan for your child.

Pay Down Debt

The last thing you’ll want to worry about when you have a new baby is old debt. Paying interest on credit cards and other debt can eat away at any extra money you’re hoping to save for or spend on your child. A debt reduction plan like the popular snowball and avalanche strategies can help you focus on methodically dumping your debt and getting it done ASAP.

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Be Ready for First-Born Expenses

Just having a baby can be expensive. In 2022, the Peterson-KFF Health System Tracker estimated that the health costs associated with pregnancy, childbirth, and postpartum care for women enrolled in large group insurance plans came to almost $19,000 on average, and average out-of-pocket payments were almost $3,000. Then there’s the crib, car seat, clothes, formula, diapers, and other things you’ll need when you bring your baby home.

If you can adjust your budget to get ready for those upfront and monthly costs, you may have a better shot at keeping up with expected and unexpected bills later on.

Preparing for Changing Costs

Your budget is bound to evolve as your child gets older. The money you spend on diapers and formula in the first years will go toward buying new shoes, clothes, toys, team uniforms, and other expenses later on. (Maybe buying a car? Putting multiple kids through college? Paying for a wedding? Who knows?)

The good news is, these days, you can use a spending app to track exactly where your money is going and decide where you want it to go. So if your kiddo comes home from school one day and wants to switch from playing soccer to playing the piano, you can quickly rework your budget categories and see where you stand.

Can You Afford to Be a Parent?

Of course your beautiful baby will be worth every penny of the $300,000 (give or take) you’ll be spending over the next 18 years. Still, you may want to keep your financial readiness in mind as you think about when to have a baby.

Besides the basic costs, raising a child also can affect your finances if you decide to do in vitro fertilization (IVF), take an unpaid maternity leave, buy a more “reliable” car or a bigger home, or go part-time at work so you can be home after school.

Any planning you can do in advance and as you go to minimize the financial blow can benefit you and your child. (Not to mention the example it will set down the road, when you’re teaching your child about money management.)

Potential Opportunities to Save

Figuring out how to save money while raising kids isn’t easy. But there are some spending categories over which you can have some control, including:

Purchase Goods Secondhand

Kids grow out of everything so quickly. Borrowing some items from friends and family, or buying things secondhand, could be a big money-saver. If your sister wants to lend you her perfectly good (and safe) crib or car seat, let her! And don’t underestimate the quality and cuteness of the clothes you can find for little ones at yard sales, consignment shops, or online. There also may be bargains to be had when shopping for secondhand sports equipment and musical instruments.

Get Help with Child Care

There may be several ways you can save on child-care costs, including forming a co-op with other parents and taking turns watching each other’s children, or asking nearby family members to help out on a full- or part-time basis.

Embrace Meal Planning

When your kids get older, it may be tempting to stop for fast food on busy nights, especially if you don’t have any idea what you’re going to serve for dinner. By planning ahead, you may be able to reduce your grocery costs, the number of trips to the grocery store, and unplanned visits to the closest hamburger joint.

Cut Household Expenses

While you’re adjusting your budget for baby, think about little things you can do to cut down on spending and expenses. Could you adjust your thermostat to save a few bucks every winter and summer? Will you have time to watch all those cable channels and streaming services with a child in the house? Or can you clean the pool yourself, cut the grass, or wash your own car?

Find Free and Cheap Family Activities

Every activity you plan for your child doesn’t have to come with a big price tag. Going around the block with your kid in a stroller, wagon, or on the back of a bike can be the best kind of free fun. Want to see a movie? Check out the price of a matinee or other discounted screenings. Or buy a bottle of bubbles or a small swimming pool for a good time in the backyard.

The Takeaway

At $310,000, the estimated cost of raising a child from birth to 18 may be daunting. But if you plan in advance for those first major costs — and adjust your budget for changing priorities as your child grows — it may be easier to manage your finances during this exciting, expensive time in your life.

Using a money tracker app can be a good place to start. SoFi lets you know right where you stand, including what you spend and how to reach your financial goals.

FAQ

How much does it cost to raise a child in 2023?

Parents could expect to spend around $310,000 or more raising a child who was born in 2015, according to a 2022 analysis conducted by the Brookings Institution. Note that the cost of raising a child can vary significantly depending on where you live, your household income, your child’s health, and other factors — including if you’ll be paying for college, a wedding, or other big-ticket items.

How much do you spend on a child before they turn 18?

The cost of raising a child can vary from one household to the next, based on many factors. But it’s been estimated that the bill for an average U.S. family raising a child to 18 (without college) could be $310,000 or more.

How much money should you save for a baby?

The more you can put away before you have a baby, the better prepared you can be. Some things to focus on might include setting up or adding to your emergency fund, continuing to make contributions to your retirement plan, and, if you hope to move to a bigger home, coming up with the necessary down payment.

Photo credit: iStock/JohnnyGreig

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0223007

Most people would like to retire when they are still healthy and active but financially secure enough to continue an energetic lifestyle. The younger the better, for most of us. However, the best age to retire for longevity is different for everyone. It depends on many factors, such as your finances, your health, and what you want to do in retirement. Some workers may want to continue in their careers for as long as they can.

Here’s a look at how age affects your retirement — and things to consider when planning your retirement timeline.

How Your Age at Retirement Affects Retirement Savings Income

So you’re looking ahead to retirement and expect to have a significant nest egg. If you retire at 65, your retirement could last 25 years or more. But what if you retire earlier — say, at 55? Your savings will have to last that much longer, but you’ll also have less time to save up. Unless you plan ahead, even a decent sized nest egg might not stretch 35 years.

The age at which you decide to retire also affects your Social Security benefit. If you retire at 62, the earliest possible Social Security retirement age, your benefit will be significantly lower than if you wait: 30% lower than if you claim benefits at your full retirement age of 67.

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The Average Retirement Age in America

The original rules for Social Security benefits assumed 65 as the common age for retirement. In 2022, the full retirement age was raised to 66 for those born between 1943 and 1959, and 67 for anyone born in 1960 or later.

The actual average age for retirement for men is 64.6, and for women 62.3. Sixty-two is the earliest someone can receive Social Security, but the longer you wait, the greater your benefit will be (more on that below).

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Factors Involved in the Ideal Retirement Age

The best time to stop working depends on your retirement savings, health benefits, and Social Security — factors that vary with age.

Savings

The best way to save for retirement is with a diversified portfolio that can average out your risk over time. Your strategy will depend on your risk tolerance, how long you have to save, and how much of your income you can afford to put away. A budgeting and spending app can help you monitor your income and expenses each month so that you know how much you should set aside.

The goal is to have enough saved up so you can stop working at your desired retirement age and have enough of a nest egg to fund the lifestyle you desire.

One rule of thumb recommends saving around 10 times your pre-retirement salary and living on 80 percent of your pre-retirement income. So if you earn $150,000 before you retire, you will need $120,000 a year to cover typical retirement expenses once you leave the workforce.

Most people have a pension plan or IRA as part of their portfolio. Here’s how age affects these savings vehicles.

Pension Plans and IRAs

Most pension plans impose an IRS penalty for withdrawing retirement funds “early,” which means before age 59 ½. You can delay your retirement as long as you like, but you must start required minimum distributions (RMDs) from retirement plans at a certain age as mandated by law, whether or not you’re retired.

In 2023, the starting age for RMDs was raised to 73 years. The exception is Roth IRAs: In 2024, holders of designated Roth 401(k) accounts will no longer be required to take RMDs during their lifetime.

Social Security

Social Security is another vital source of income for retirees. You can start to claim benefits at age 62, but at a reduced amount. People who retire at age 66 or 67 will receive full Social Security benefits. If you delay until age 70, you’ll receive even more.

A lot rides on your definition of retirement, too. You can semi-retire at age 65 (or earlier), work part-time, and collect Social Security benefits. However, if you earn more than the yearly earnings limit, your benefits will be reduced. If you are under full retirement age, the Social Security Administration will deduct $1 from your benefit payments for every $2 you earn above the annual limit. That limit was $21,240 in 2023.

Medicare

Individuals are eligible for Medicare, a government-sponsored health plan, at age 65. If you retire earlier, you will have to factor in the cost of out-of-pocket health insurance, which is expensive. The average national cost of health insurance is $456 per month, whereas the Medicare Part B premium is around $165 per month.

Health Benefits

The best age to retire for health is debatable. Going to work provides us with social connections, and mental and physical stimulation, all of which keep us healthy. Many people feel they lose their purpose and identity when they retire and even fall into depression. A recent paper published in the Journal of Economic Behavior & Organization found that early retirement may even accelerate cognitive decline in late adulthood.

What Is the Best Age to Retire?

Considering these factors, the ideal age to retire is different for everyone. It depends on your health, your finances, whether your home state taxes retirement income, and what you want to do in your retirement. Also, as people age, the decision of when to retire can change with their circumstances.

For now, choose a retirement date and start saving. The earlier you start, the more options and bigger nest egg you will have when the time comes.

What If You Don’t Have Enough Money by the Ideal Retirement Age?

Some guidelines recommend having 10 times your annual salary saved by age 67, the age at which people born after 1960 can retire with full Social Security benefits. But what if you fall behind these savings benchmarks?

If your savings fall short, you’ll have to play catch up. Make sure you are maximizing your 401(k) contributions and your employer match. Contribute to an IRA or a Roth IRA, too. And if you receive any windfalls, such as tax refunds or bonuses, put those funds toward your retirement.

Another strategy is to free up more cash for retirement savings by examining your budget and reducing expenses. Can you eat out less? Downsize your home, or sell other assets?

You could also continue working for a few additional years to increase your Social Security benefits. You may work part-time, accept a less demanding position with less pay, or do some consulting work.

The Takeaway

Just about everyone wants to retire when they are still healthy so they can enjoy their later years. When deciding what age to retire, consider what it will take to maintain the lifestyle that you want. Possible income streams include withdrawals from a health savings plan and retirement accounts, Social Security benefits, and revenue from investment assets, such as rental property. Working part-time might be an option until you are ready to fully retire.

The decision of when to retire can change with your circumstances. The best plan is to set goals as soon as you can and start saving for retirement early. That way, you will have more options and a bigger nest egg when the time comes.

Take control of your finances with SoFi’s money tracker app, available with SoFi. Connect all of your accounts on one mobile dashboard to get a bird’s-eye view of your balances on the go. Set monthly spending targets, and review your top spending categories. You can even talk one-on-one with a financial planner to set ambitious goals for your money and your life.

FAQ

What is the best age to retire for your health?

Some people thrive in retirement, and some people find themselves at a loss. Work provides social interaction and mental and physical stimulation, so retiring early may not be healthier if the result is a more sedentary and lonely lifestyle.

What is the best age to retire for Social Security benefits?

Retiring at age 70 would give you maximum Social Security benefits. According to the Social Security Administration, if you retire in 2023 at full retirement age, your maximum monthly benefit is about $3,627. However, if you retire early at age 62, your maximum benefit is just $2,572. And if you put off retirement until age 70, your maximum benefit rises to $4,555.

What is the most popular age to take Social Security?

According to U.S. News & World Report, full retirement age has become the most popular age to claim payments. For many people, that is age 66. Those with a full retirement age of 67 will get a 6.7% pay cut if they sign up for payments at age 66.

Photo credit: iStock/Vladimir Vladimirov

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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