The typical American retires much earlier than he or she expects, and it's often not by choice, according to new research from the Transamerica Center for Retirement Studies.
The average retirement age in the U.S. is 62, with nearly six in 10 retirees telling the research firm they withdrew from the workforce earlier than they planned. Nearly half of them said the reason was physical limitations or health issues such as disability. Losing a job or an organizational change in their employer was another reason why people stopped working before planning to retire.
“Financially uncertain”
The findings underscore the fragility of retirement in the US, with older Americans often finding themselves retiring before they are financially ready to leave. And while many people are living past generations – the typical respondent told Transamerica they believed they would live to age 90 – they also face the prospect of having to support themselves financially for several decades in retirement. are doing, which could easily increase or even deplete their savings.
“Many of them are financially precarious – if they suffer some kind of major financial shock or their health declines and they need long-term care, they will have a hard time affording it,” Transamerica CEO and President Katherine Collinson of the Center for Retirement Studies told CBS MoneyWatch.
This research supports previous research about the typical retirement age, with the nonprofit Employee Benefit Research Institute finding earlier this year that average retirement age For Americans it is 62. This highlights a 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 those currently in the workforce,” Collinson said.
He said people should actively maintain their health and keep their skills up to date, as well as educate themselves about retirement and financial planning, as well as building savings.
Why do Americans claim Social Security early?
Retiring earlier than one 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 urge Americans to do to hold back Delay claiming Social Security as long as possible because of the financial benefits of waiting. Workers can apply for retirement benefits as early as age 62, but there is a variation of about 30%. Shortage into their monthly checks compared to waiting until full retirement age, which is 66 or 67 depending on one's birth year.
But the average age when Americans claim Social Security benefits is 63, Transamerica found in a survey of more than 2,400 retirees. That means many elderly Americans are locking themselves into permanently lower monthly checks during their retirement.
On the other hand, waiting until age 70 to receive Social Security – the maximum age to claim benefits – provides a more than 30% increase to one's monthly benefit. Despite that incentive, Transamerica found that only 4% of retirees wait until age 70 to apply 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 spousal situation, maybe if they need the income, one claims first and the other later, or if they can get back into the workforce and hit the pause button on Social Security Can get more income.”
Another reason to claim Social Security early may be that many retirees do not have enough money in their retirement funds to keep them afloat. Transamerica found that only half of American retirees participated in a 401(k) or similar plan during their working careers, while more than one in four said their employer ever provided retirement benefits while they worked. Not offered.
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 such as 401(k)s or IRAs would be their main source of income.
challenging but happy
The study found that despite the challenges, many retirees are optimistic about stepping back from work. Nearly 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, especially with their financial situation, and overall they're doing well.”
Americans “dream of retirement,” he added. “Retirement is typically more about freedom and the ability to spend your time how you want, rather than financial independence.”