A new study from the Trans america Center for Retirement Studies shows that a lot of Americans retire much earlier than they planned. This is usually because of unplanned events rather than their own choice.
People who retire early without planning to may have big financial problems because they may not have saved enough or planned ahead enough for the change.
People who understand the reasons behind this early retirement can better plan and navigate their financial futures, making sure they are not caught off guard when the time comes.
Why do people retire earlier?
Despite the popular belief that most individuals retire at 65, the research by Trans america Center for Retirement Studies reveals otherwise.
In the U.S., the median retirement age is 62, with nearly 60% of retirees reporting they left the workforce earlier than planned.
Health issues, including physical limitations and disability, were the primary reasons for early retirement, affecting almost half of those surveyed. Other factors include the following:
- Job loss
- Organizational changes
This shows how important it is to start planning for retirement earlier, in case something unexpected comes up.
The study’s results show how vulnerable retirement is for many Americans. Many older workers retire earlier than planned, which means they are not as financially ready for retirement as they thought they would be.
As people live longer, they may have to support themselves financially for decades after they retire, which could use up all of their savings. This shows how important it is to plan for the unexpected and make sure you have enough money to last through retirement.
Catherine Collinson, CEO and president of the Trans america Center for Retirement Studies, said, “Many of them are financially precarious.
If they had some kind of major financial shock or their health would get worse and they needed long-term care, they would have a hard time affording it.”
Collinson said that retirees who have to suddenly leave their jobs should serve as a “cautionary tale” for people who are still working.
Social Security and early retirement
People who get Social Security benefits may have trouble if they retire early because they have to claim benefits at a lower rate.
If you claim your benefits before the full retirement age, which is usually 66 or 67, your monthly checks will be smaller, which can have a big effect on your long-term financial security.
Since Social Security is only meant to replace a portion of a person’s income before retirement, starting benefits early may leave people without enough money to cover their costs, especially if they have to retire later in life because people are living longer.
If you wait until you are 70 years old to start getting Social Security benefits, you will get more each month—more than 30% more.
Trans america says that even though there is a benefit, only 4% of retirees choose (or are able) to wait until they reach the maximum age to start getting their benefits.
Many retirees who have to choose to claim earlier miss out on this extra money, which could affect their ability to make ends meet in the long term.
Collinson said, “One of the most important things they can do is fully understand their benefits and see if there are any ways they can make those benefits last longer.”
If they need the money, one spouse might file for Social Security first and the other later, or they might go back to work, put Social Security on hold, and get more money that way.
