According to new research from the Transamerica Center for Retirement Studies, the average American retires much earlier than expected, and it’s often not by choice.
The average retirement age in the U.S. is 62, with nearly six in 10 retirees telling the research firm that they have withdrawn from the workforce earlier than they planned. About half of those people said it was because of health problems, such as physical limitations or disabilities. Losing a job or an organizational change in their employer were among other reasons people stopped working before planning to retire.
“Financially Insecure”
These findings underscore the fragility of retirement in the U.S., with older Americans often financially ready to retire before they actually retire. And with many people outliving earlier generations — the typical respondent told Transamerica they believe they’ll live to age 90 — they’ll have decades to financially support themselves in retirement. are also facing the possibility of, who can easily increase or drain their savings.
“Many of them are financially insecure – if they get a big financial shock or their health goes down and they need long-term care, it’s hard for them to afford it. Gay,” Kathryn Collinson, CEO and President of Transamerica. The Center for Retirement Studies told CBS MoneyWatch.
The research backs up previous research on the typical retirement age, the nonprofit Employee Benefit Research Institute found earlier this year. Median retirement age 62 years for Americans. This illustrates the gap between retirement plans and reality. Business leaders And policy experts often urge Americans to work longer so they can save more for their old age — a strategy that often doesn’t pan out as envisioned.
Retirees being forced to leave their jobs earlier than planned is “a cautionary tale for people in the workforce right now,” Collinson said.
He noted that people should actively maintain their health and keep their skills up-to-date, as well as educate themselves about retirement and financial planning, adding that Savings must be eliminated.
Why Americans Claim Social Security Early
Retiring earlier than a person expects may explain why millions of Americans claim Social Security before reaching their “full retirement age,” or the age at which they are entitled to their full benefits.
Retirement experts generally emphasize that Americans Hold on Claiming Social Security as long as possible because of the financial benefits of waiting. Workers can file for retirement benefits as early as age 62, but the trade-off is about 30%. deficiency Compared to waiting until full retirement age, which is either 66 or 67 depending on one’s year of birth, in their monthly check.
But the median age when Americans claim Social Security benefits is 63, TransAmerica found in a survey of more than 2,400 retirees. That means many older Americans are locking themselves into permanently lower monthly checks throughout their retirement years.
On the other hand, waiting to collect Social Security until age 70 — the maximum age to claim benefits — provides a more than 30% increase in one’s monthly benefits. Despite this incentive, Transamerica found that only 4% of retirees wait until age 70 to file for their benefits.
“One of the most important things they can do is fully understand their benefits, and if they have any options to increase those benefits,” Collinson said. “If it’s a married couple situation, maybe if they need income, one claims first and the other later, or if they can go back into the workforce and hit the pause button on Social Security and more. can earn.”
Another reason to claim Social Security early is that many retirees may not have enough money to put into a retirement fund. Transamerica found that nearly half of U.S. retirees participated in a 401(k) or similar plan throughout their careers, while more than one in four said their employer never provided retirement benefits. Not offered when they worked.
Nearly 6 in 10 retirees report Social Security as their primary source of income, underscoring the program’s importance to older Americans. By comparison, only 1 in 10 said retirement accounts like 401(k)s or IRAs would be their primary source of income.
Challenged but happy
Despite the challenges, many retirees are serious about stepping back from work, the study found. About 9 in 10 described themselves as generally happy and having close relationships with family and friends.
“One thing that stands out is that retirees are really enjoying their time in retirement, which I think is good for all of us,” Collinson said. “They’ve made some adjustments, particularly in their financial situation, and overall they’re doing well.”
Americans “dream about retirement,” he added. “Retirement is more about freedom and the ability to spend time as you want, not specifically financial freedom.”