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Most people expect to retire at age 60. Is this realistic?
There’s been a big shift in how people think about their later years: new data from the Federal Reserve Bank of New York shows that most Americans don’t expect to work past age 60.
The number of workers who plan to work full-time beyond the age of 62 has fallen to 46%, down from 55% four years ago. Just 31% of workers expect to work beyond age 67, down from 36% in 2020. The declines span age, education and income groups, but more female workers than men are eyeing the door sooner or later.
This raises the question: are these expectations reasonable?
Sorry to roll your eyes. The straight answer is that for many people, taking a paycheck at age 62 and leaving behind the health care and other benefits that come with full-time employment is a terrible idea.
For starters, multitudes of Americans have woefully little saved for retirement. And the simple cost of having to pay medical bills during the three-year gap before being eligible to enroll in Medicare is certainly something they didn’t put into the calculator.
Then add in the growing future medical expenses not covered by Medicare. A 65-year-old single person may need about $157,500 saved (after taxes) to cover healthcare expenses in retirement. The average retired couple may need to save approximately $315,000, according to Fidelity.
Calculating the cost of living three decades after retiring at 62 makes my head spin. If you think Social Security benefits will help you, think again. Social Security offers less than most people think.
How much you need for retirement varies greatly from person to person, but the gist is that the more years you earn in salary, the greater your chances of not outliving your money.
See more information: How much money should I have saved by age 50?
Behind the 62-Year-Old Exit Strategy
The factors driving the decline in the age Americans expect to retire are unclear, the researchers wrote, but they pointed to a rise in the number of people preferring to work part-time rather than full-time, a post-pandemic rethink about the internal value of work and what really matters to them and how they want to spend their time in a life where things can change in an instant, and a jump in household net wealth due to retirement account gains.
The dream of retiring at age 62 does not take into account the advantages of working longer. The longer you keep earning in some form, the better for your future financial security, even if it’s just a safety net. And mental pay for work, while difficult to put a value on, may be an essential ingredient in feeling happier and more engaged as we age. It can provide purpose and a sense of feeling worth.
The story continues
Maybe that’s why older Americans now work, on average, more hours than in previous decades. Today, 62% of workers aged 65 and over work full time, compared to 47% in 1987, according to the Pew Research Center. And they are more likely to have a four-year college degree than in the past.
Not retiring or returning to workoften part-time after leaving the workforce, is gaining momentum across the country, especially after many people were forced to retire earlier than they expected during the pandemic.
The number of workers who plan to work full-time beyond age 62 went into free fall, falling to 46% in March, down from 55% four years ago, according to a study by the Federal Reserve Bank of New York. (Getty Creative) (Ira T. Nicolai via Getty Images)
Expectations of workers versus reality of retirees
While the New York Fed’s investigation is somewhat surprising, it is in line with the reality for many Americans. Due to health problems, being laid off or caring for elderly relatives, the majority of retirees – 7 in 10 – report retire before age 65.
Therefore, whether by necessity or choice, retiring early can spell trouble when it comes to covering living costs in retirement. Less than half of retired Americans believe they have saved enough, according to study new research from investment manager Schroders.
Around a quarter are unsure and around a third are convinced they do not have enough savings. Meanwhile, 1 in 3 retirees are worried that financial stress will affect your overall health.
“Many baby boomers retired with no idea if their savings would be enough, which is creating undue financial stress,” said Deb Boyden, head of US Defined Contribution at Schroders. “This situation is a wake-up call for the generations that will follow the boomers into retirement and highlights the need for better planning and retirement income solutions.”
It’s not pretty. Nearly half of all retirees report that their retirement expenses are higher than they expected, and about half believe that Medicare would cover more of their healthcare expenses, according to Schroders research.
See more information: Retirement Planning: A Step-by-Step Guide
Inflation is certainly one of the main concerns. “Prices in the US have increased noticeably in recent years, and this is particularly challenging for retirees living on fixed income sources,” said Boyden. And most retired Americans admit they have no idea how long their savings will last.
Almost half of all retirees say that their retirement expenses are higher than expected, according to a survey carried out by investment manager Schroders. (Getty Creative) (LordHenriVoton via Getty Images)
Never retire and live forever?
In a turnaround from the New York Fed survey, about a quarter of adults ages 50 and older say they hope to never retire. by an AARP surveyand about 1 in 4 have no retirement savings.
Another report reinforces this “never retire” sentiment. More than a quarter of all non-retired investors are unsure whether they will ever retire, and another 19% expect to retire later than planned because of inflation, according to the new research from the Nationwide Retirement Institute.
“High prices, combined with the fact that too many people don’t have enough savings for retirement, are making it increasingly difficult for people to choose when to retire,” David John, senior political consultant at AARP, told Yahoo Finance.
One of the reasons people want to stop working full-time before the traditional retirement age of 65 is that they are not sure how long they will be able to live.
Only about a third of Americans know the average life expectancy of retireesand only 12% knew the right answers to a basic longevity literacy quiz.
These were: Men are likely to live to age 84 and women to age 87. The probability among 65-year-olds of living to at least age 90: 3 in 10 men and 4 in 10 women. Finally, the probability among 65-year-olds of not living beyond 70: 5% of men and less than 5% of women.
The bottom line: Retiring at 62 sounds great, but having enough funds to live comfortably for what could be three decades after you leave the workforce can be formidable.
One key concern: The 2024 Social Security and Medicare trustees’ reports projected that the retirement trust fund would run dry by 2033. (Getty Creative) (Douglas Sacha via Getty Images)
Retirement plans and the impact of Social Security
The big X factor in all of this: Social Security.
“To the extent that these expectations signal actual future retirement behavior, they also have implications for consumers’ future decisions about the future. timing of claims for Social Security benefits and the receipt of those benefits,” the New York Fed economists wrote.
In other words, people may be more likely to claim their Social Security benefits at age 62, the earliest age possible, rather than delaying until full retirement age, which ranges from age 66 to 67 – or Better yet, wait until you’re 70 to get your deferred earnings. retirement credits, which significantly increases the monthly check for decades.
It also means that more retirees could tap the retirement trust fund and not pay, which could undermine the economic foundations of the program.
A fundamental concern: the Social Security and Medicare Trustees Projected Reports for 2024 that the retirement trust fund would be depleted in 2033, unchanged from last year. If the trust fund is depleted, payroll taxes will continue to fund 79% of scheduled benefits – slightly better than the 77% projected last year.
This has consequences for the millions of workers who plan to rely on Social Security for a major portion of their retirement income. About half of the population aged 65 and over lives in households that receive at least half of their family income from Social Security and about a quarter rely on Social Security for at least 90% of their family income.
As Maya MacGuineas, chair of the Committee for a Responsible Federal Budget, summarized previously for Yahoo Finance: “We are less than a decade away from a massive solvency crisis that would reduce benefits for more than 67 million seniors and severely limit their access to health care soon after.”
While there are certainly people who have adequately saved for a long retirement—a hearty congratulations if you’re one of them—the reality is that an all-or-nothing work spirit is a thing of the past, no matter how tempting it may be. is to climb aboard the Dream Weaver train.
Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and author of 14 books, including “In control over 50: how to succeed in the new world of work” and “Never too old to get rich.” Follow her on X @kerryhannon.