The retirement expectations of older Americans tend to center around two significant milestones: the Social Security early retirement age of 62 and the Medicare eligibility age of 65. However, a recent publication from the Social Science Research Network reveals that, on average, Americans retire earlier than their initial expectations. Several societal and demographic factors play a role in shaping the actual retirement age.
The study was conducted by four researchers, including Zhikun Liu and Naomi Fink from Europacifica Consulting, David Blanchett from PGIM DC Solutions, and Qi Sun from Pacific Life. Their analysis drew from two datasets: the Prudential Financial Wellness Survey and the University of Michigan’s Health and Retirement Study survey series, which collects data biennially from over 20,000 U.S. households aged 50 and above.
Several crucial factors can influence anticipated and actual retirement dates, such as health, wealth, age, marital status changes, life expectancy, education, disabilities, and significant illnesses. Retirement advisors can create effective strategies to overcome the gap between expected and real retirement by concentrating on these factors, which can help reduce any adverse effects.
Analyzing the Importance of Retirement Age
The decision of when to retire is one of the most crucial choices a person makes regarding retirement. This decision’s flexibility makes it one that workers can exert more control over compared to other retirement aspects.
The study emphasizes that individuals aiming to maintain their desired post-retirement lifestyle need careful financial planning and a more accurate projection of their retirement age. Conversely, those lacking sufficient preparedness may find their retirement plans at a certain age unattainable.
Socioeconomic and Demographic Factors
Previous studies have analyzed different socioeconomic and demographic factors that affect the expected retirement age of elderly individuals in the United States. These factors encompass debt, assets, education, race, gender, marital status, and income. The age at which a person becomes eligible for retirement benefits significantly determines when they actually retire. Additionally, events such as the global financial crisis and the COVID-19 pandemic have been shown to speed up retirement decisions.
However, limited research exists concerning the specific impact of the COVID-19 pandemic on older Americans’ retirement expectations. The authors emphasize the need for a more comprehensive exploration, given that retirement is often a dynamic process rather than a one-time decision.
Retirement Expectations and Reality
The study’s results indicate that over 50% of Americans retire earlier than they initially expected. Factors such as health, wealth, age, marital status changes, mortality expectations, education, disability, and major illness diagnoses significantly influence retirement decisions relative to expectations.
Despite the COVID-19 pandemic’s impact on work and financial situations, retirement age expectations remained relatively stable, particularly among older households. This stability suggests that people adhere to their anticipated retirement timelines despite external disruptions.
Regarding actual retirement ages, the analysis revealed that more than 44% of respondents retire before the age of 62, which is the peak retirement age. This finding contrasts with the initial expectation, where only 24% anticipated retiring before 62.
The research highlights the significance of comprehending the gap between projected and real retirement ages. As a result of this understanding, policymakers, employers, and financial service providers can design retirement benefits more efficiently, which will improve financial stability for individuals, families, and the Social Security system as a whole.