Most Americans Retire Before They Are Ready To Do So

The typical American retires far earlier than he or she expects to, and it's often not by choice, according to new research from the Employee Benefit Research Institute (EBRI) and from the Transamerica Center for Retirement Studies.

Americans have an average life expectancy of 77.5. Many say they want to work to age 70, or even beyond. Yet the statistics show that the average American retires not at age 70, or even at age 65, but at age 62. Yes, the median retirement age in the U.S. is 62, with nearly 60% of retirees telling the research firms that they stepped back from the workforce earlier than they had planned. Medicare eligibility isn’t until age 65, leaving a potentially big gap in coverage, which can be expensive to fill.

Almost half of the retirees said the reason they left came down to health issues, such as physical limitations or disability. The others blamed their departures on being laid off, downsized or incentivized to take an early retirement offering.

Many people imagine easing out of employment on their own terms. But leaving “on your own terms” is rarer than you think – it seems that actual retirement arrives abruptly and unexpectedly for most people, triggered as stated above either by declining health or corporate downsizing. Our blog post on, “Is there a White Collar Recession?” deals with these issues as well.

In the EBRI survey, three-quarters of workers said they expected to continue working for pay in retirement. Yet, only 30% of retirees said they had ever actually done so.

In the Transamerica survey, nearly half of older workers said they expected to “transition” into retirement, gradually reducing their hours or pivoting to a less demanding job. (See our blog post on “Flextirement.) But only 13% of retirees said they had actually transitioned into retirement. More often, workers retired abruptly, never to work again.

We advise our clients that when you are in your 60s, it can be difficult to replicate the same positions and salaries you had earlier in your career. This necessitates careful negotiation of severance packages when entering new jobs, as well as when exiting. Consulting can provide a solid revenue stream if you have a marketable expertise and can save companies the cost of hiring full-time employees to secure the kind of help you are able to provide.

For younger workers, take a hint. Save for retirement from an early age. Pay down debt. At a minimum, maximize your employer’s 401K match, and save as aggressively as you can, for sure by the time you reach your 40s.