Feb 15, 2025
Nearly half (49%) of non-retired, middle-class workers are expecting to work longer than the traditional retirement age, which is usually seen as age 65, according to a recent survey report from the Transamerica Center for Retirement Studies.
In reality, though, very few people end up lasting that long. The data show that while many hope to work for more years than normal, it's actually far more common to retire sooner than 65. In fact, the median age of retirement is just 62.
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So, why is there such a gap between how long people plan to work and when they actually retire? Sadly, it's not because everyone is hitting the golf course early.
Why are so many retirees leaving work ahead of schedule?
According to another recent survey by the Transamerica Center, 58% of retirees left work sooner than planned, and most for reasons beyond their control. Specifically:
- 46% left work as a result of personal health issues including physical limitations or disability.
- 43% retired early for employment-related reasons, including loss of a job, dissatisfaction with work, organizational changes at work or being offered a retirement buyout.
- 20% had to leave for family-related reasons, such as caregiving or the retirement of a spouse.
Only 21% of people who retired sooner than planned did so because they were financially able to retire either due to saving enough or receiving a windfall like an inheritance.
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How does an unplanned early retirement affect your finances?
Unfortunately, retiring earlier than planned can have less than ideal consequences. Specifically:
- Being forced to claim Social Security earlier than anticipated
- Incurring expensive health insurance costs before qualifying for Medicare
- Having less time to save than anticipated
- Needing to rely on savings for longer
Each of these issues can leave seniors struggling financially. Claiming Social Security early, for example, can result in a significant reduction of benefits.
Retiring before your full retirement age (FRA) reduces your benefit by 25% to 30%, depending on your year of birth.
Even retiring at FRA results in a payment below your max benefit, as waiting beyond FRA allows you to earn delayed retirement credits worth 132% of your monthly benefit. Shrinking your lifetime benefits by claiming before 70 means you have less to live on later in life.
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Having less time to save and relying on savings for longer can also be a huge problem, with Vanguard reporting that the median defined contribution plan balance is $87,571 for seniors ages 55 to 64 and $88,488 for those 65 and over.
A nest egg of $88,488 may produce only around $3,539.52 in income each year at a safe 4% withdrawal rate.
With smaller-than-anticipated Social Security benefits due to an early claim and a low retirement account balance, those forced into retirement sooner than planned will need to budget carefully and understand their net worth to make their money stretch far enough and to ensure it lasts for life.
Those who are not yet retired should be aware of how often forced early retirement occurs and may want to aim to reach their retirement savings goal by 62 — in case this happens to them.
Being prepared to retire early can save you a lot of heartache if you can't work as long as you expected — plus you get the benefit of enjoying life sooner if all goes well.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
