Many plan to work well into their 60s or even 70s, thinking they can compensate for years of undersaving. But according to recent surveys, retirement may come earlier than expected for many Americans – whether they're ready for it or not.
The average retirement age in the U.S. is about 62 years old, even though most workers expect to retire around 67. In fact, more than 56% of retirees left the workforce earlier than they planned, according to a Transamerica survey. So, what's causing this gap between expectations and reality?
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Health is a big factor. Roughly 38% of early retirees say they had to stop working because of health issues or disabilities. This isn't always part of the plan, but sudden medical conditions or ongoing health problems can change things quickly. This is a reality many don't account for when imagining working into their late 60s or 70s.
Then there's the job market itself. Fourteen percent of those who retired early did so after being laid off; for many, finding another job isn't appealing or feasible.
Companies downsize, industries change and job security becomes less certain as people age, making retirement sometimes less of a choice and more of a necessity.
In addition to these reasons, life events – like family changes or unexpected financial shifts – can also force people to reconsider their plans. Some may find they've saved enough to retire early, but for most, it's often a mix of circumstance and necessity that leads them there.
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Financially, retiring earlier than planned can be a challenge. Many people end up dipping into their savings sooner than expected, which stretches their retirement funds thinner over a longer period. According to various reports, the average American retiree has around $269,078 saved for retirement, far below what's typically recommended. Financial planners suggest a target of around $572,000 and that gap can mean tough choices down the road.
Additionally, if people claim Social Security benefits before they hit their full retirement age – 67 for many – they'll see a permanent reduction in monthly benefits. Plus, if they retire before Medicare eligibility kicks in at 65, they may face higher health care costs or gaps in coverage.
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So, what does this all mean? Planning to work longer might not be the foolproof strategy some hope it will be. Between health issues, layoffs and other unexpected life events, early retirement happens to more people than you might think. And without enough savings, the financial picture can get complicated fast.
While everyone's situation is different, having a backup plan and saving more now might be the safest bet for those who want more control when they retire. It's always smart to reassess your retirement plan and consulting with a financial advisor can give you a clearer picture of where you stand. They can help you adjust your savings strategy, review your investment options and ensure you're prepared for any surprises that could force early retirement.
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