Planning to retire at 65? Most Americans stop working years earlier — and not because they want to.
New research from the Pan American Center for Retirement Research shows that the typical American retires much earlier than he or she expected, and often not by choice.
The median retirement age in the U.S. is 62, and nearly six in 10 retirees told the research firm they were exiting the workforce earlier than planned. Nearly half said the cause was down to health issues, such as physical limitations or disabilities. Loss of a job or organizational changes at the employer are among other reasons why people stop working before planning to retire.
‘Financial instability’
The findings highlight the fragility of American retirement, with older Americans often finding themselves in retirement before they are financially ready. With many people living longer than previous generations—a typical respondent told Transamerica they believed they would live to be 90—they also face the prospect of supporting themselves financially for decades after retirement, which It’s easy to deplete or even deplete their savings.
“Many of them are not financially stable — if they suffer some kind of major financial shock, or if their health deteriorates and requires long-term Care, they’re going to have a hard time affording it,” the Center for Retirement Research told CBS Financial Watch.
The research supports previous research on typical retirement ages, with the nonprofit Employee Benefit Research Institute finding earlier this year that Median retirement age The number for Americans is 62. This highlights the gap between retirement plans and reality, business leader Policy experts often urge Americans to work longer to save more money for later years, but the strategy often doesn’t unfold as expected.
Collinson said retirees being forced to leave their jobs early “serves as a cautionary tale for the current workforce.”
She noted that people should be proactive about staying healthy and keeping their skills up-to-date, while educating themselves about retirement and financial planning and building savings.
Why Americans apply for Social Security early
Early retirement could explain why millions of Americans file for Social Security before they reach “full retirement age,” or the age when they are entitled to full benefits.
Retirement experts broadly urge Americans put off Apply for Social Security for as long as possible because there are financial benefits to waiting. Workers can apply for retirement benefits as early as age 62, but at a cost of about 30% reduce It will take longer to receive your monthly check than if you wait until full retirement age, which is 66 or 67, depending on your year of birth.
But a Transamerica survey of more than 2,400 retirees found that the average age at which Americans receive Social Security benefits is 63. That means many older Americans are locking themselves into permanently lower monthly checks during retirement.
On the other hand, waiting to collect Social Security until age 70 (the maximum age for benefits) can increase monthly benefits by more than 30%. Despite such incentives, Transamerica found that only 4% of retirees waited until age 70 to apply for benefits.
“One of the most important things they can do is fully understand their benefits and whether they have any options to extend those benefits,” Collinson said. “If it’s a spousal situation, maybe if they need the income, one person applies first , another one applies later, or if they can rejoin the workforce and hit the pause button on Social Security and earn more.”
Another reason to file for Social Security early may be that many retirees may not have enough money saved in retirement funds to make ends meet. Transamerica found that only about half of U.S. retirees participated in a 401(k) or similar plan throughout their careers, while more than a quarter said their employer never offered retirement benefits while they were working.
About 6 in 10 retirees cite Social Security as their primary source of income, underscoring the program’s importance to older Americans. In contrast, only about one in 10 said a retirement account such as a 401(k) or IRA would be their primary source of income.
Challenging but happy
Research finds that despite the challenges, many retirees remain optimistic about quitting work. Nearly nine in 10 say they are generally happy and close to family and friends.
“One of the things that stands out is retirees are really enjoying their retirement, and I think that bodes well for all of us,” Collinson said. “They’ve made some adjustments, especially financially. , overall they did a good job.”
She added that Americans “dream about retirement.” “Retirement is more about freedom and the ability to spend your time on your own terms than it is about specific financial freedom.”
