It can be hard to accurately predict when you will retire. Among those looking ahead to retirement, many expect to leave work at age 63, according to a 2024 survey by Mass Mutual. Although 63 is the anticipated median retirement age, workers report retiring at a median age of 62, the survey found.
The slight gap indicates that many Americans plan to continue working longer than they actually do. However, more than a third of pre-retirees report that they are behind in their retirement savings, which likely means future retirees will quit working later.
Common Reasons for Early Retirement
Unforeseen circumstances often lead to early retirement. Common reasons to retire early include health issues, the onset of a disability or choosing to act as a caregiver for a loved one.
One key consideration for retiring early is health insurance, as Medicare is available at age 65. You may need to look for your own coverage until you reach that milestone.
“Health care exchanges make it much easier to budget and shop for insurance, and subsidies exist to help underwrite the cost of insurance,” said Matt Bruce, president of Pointer Financial Group in Wauwatosa, Wisconsin, in an email. “However, we have seen many early retirees opt to use health care sharing companies to cover short-term health expenses between their retirement and when Medicare is available.” If your spouse is still working, you may be eligible for coverage through their insurance.
Early retirement also comes with various financial implications.
“Early retirees may face a lower Social Security benefit and have to rely more heavily on their retirement savings,” said Kami Adams, retirement income specialist at Creative Legacy Group in LaGrange, Georgia, in an email. “Retiring early means more years in retirement, which can increase the risk of running out of money later in life.”
Forced Out of the Workforce
Among retirees, 31% state they left their job due to changes at their company, according to a 2023 Retirement Confidence Survey by the Employee Benefit Research Institute. Some people end up in early retirement because they are offered an early retirement incentive package or their skills are out of date for the position. There could also be workplace restructuring, such as a downsizing, business closure or reorganization that results in job loss.
After leaving one job, older workers may find it difficult to replace their full salary right away. They might need to strategize and tap their networks to get a job that aligns with their experience and area of expertise. For those interested in part-time work, remote and flexible positions may be a good fit.
A Fortuitous Early Retirement
There can also be positive reasons workers enter retirement early. Perhaps your investments performed better than expected or you inherited a windfall and were able to retire sooner than planned. In cases of early retirees, 35% report being able to afford to step away, according to the Retirement Confidence Survey. Some retirees have followed the financial independence, retire early movement, also known as FIRE, which enabled them to quit work in their 40s or 50s. Doing so can open doors to pursue other activities or spend more time with family members.
[7 Lessons From Those Who Retired by FIRE]
Aiming to Delay Retirement
Many workers say they are hoping to retire at an older age than is currently typical. There can be valuable incentives to delay retirement, including a few extra years to collect a salary and avoid tapping your nest egg.
“Delaying retirement can have several benefits, including a higher Social Security benefit, more time to save for retirement and a reduced risk of running out of money later in life,” Adams said. “However, delaying retirement can also mean missing out on the opportunity to enjoy retirement while still in good health.”
You’ll want to weigh all the factors before making a final decision regarding when to quit work. You can then map out a budget that aligns with your retirement goals. Keeping an open mind can be helpful, as you’ll be able to adapt if you retire earlier than planned.
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What Is the Average Retirement Age in the U.S.? originally appeared on usnews.com
Update 03/18/24: This story was previously published at an earlier date and has been updated with new information.
