The U.S. Social Security system is approaching a major financial crisis, with projections indicating it could run out of money by 2033. To combat this issue, lawmakers are considering increasing the average retirement age.
Surveys show the current average retirement age for Americans is 62. However, many workers expect to retire at 67. Interestingly, over 56% of retirees stop working earlier than expected, with health problems or disabilities being the key reasons for about 38% of early retirements.
Another significant factor driving early retirement is the state of the labor market. About 14% of early retirees left the workforce after being laid off. Once people stop working, many are reluctant to look for new employment, especially if they’ve already considered claiming Social Security benefits. For others, financial or family pressures force early retirement, even if it wasn’t part of the plan.
Early Retirement Challenges
Retiring earlier than planned brings several challenges. For most, it means tapping into retirement savings earlier, depleting assets faster than expected. This can significantly reduce the size of their retirement funds over time. Early retirees often face long-term financial difficulties due to this, especially since many haven’t saved enough to comfortably retire.
On average, American retirees have saved $269,078 for retirement—less than half of the $572,000 many financial experts recommend. If they claim Social Security benefits before reaching full retirement age (currently 67 for most), their monthly benefits are permanently reduced. Additionally, retiring before age 65 can lead to gaps in healthcare coverage, complicating medical access.
Reevaluate Savings
Given these issues, it’s wise for anyone planning to retire to reassess their financial situation. A key strategy is boosting retirement savings now and having a backup plan. Financial advisors can assist in making these adjustments, helping people look into investment options and prepare for unforeseen circumstances that might lead to early retirement.
Retiring early isn’t always a choice, and it’s essential to have enough funds to handle unexpected life events. That’s why building up your savings today could provide more security and flexibility tomorrow.
Declining Benefits
As the average population age increases, retirement has become a hot political topic. There’s growing pressure to support older adults through better healthcare and financial systems. However, the reality is that Social Security checks may not provide enough to cover the rising cost of living.
The average salary for full-time workers in the U.S. is $74,738, but income levels vary depending on factors like geography, industry, race, and gender. A staggering 34% of the U.S. population earned less than $50,000 in 2022. This income disparity makes it even harder for low earners to save for retirement.
Even with occasional federal cost of living adjustments (COLA), Social Security benefits may fall short of covering the expenses many retirees face. Given the increasing strain on the Social Security system, future retirees might need to rely more on privatized savings plans like 401Ks and IRAs. Unfortunately, contributing to these accounts can be challenging in the face of an unpredictable economy.
Delayed Retirement
For younger Americans, the situation is even more complicated. Many don’t feel confident they’ll ever be able to retire. According to a TIAA Institute study, 15% of those who haven’t yet reached retirement age have no plans to stop working, while 47% are only somewhat confident they will be able to retire when expected. The situation is especially concerning for younger workers, with only 37% of Americans aged 22 to 34 feeling confident about their future retirement.
Healthcare access and the need for continued income often push many people to delay retirement beyond 67. This trend could continue, particularly as many individuals remain unsure whether Social Security will still be available when they reach retirement age.
While adjusting the retirement age could help alleviate the Social Security system’s financial woes, it’s not a perfect solution. Many Americans, especially those in lower-income brackets, may find it increasingly difficult to afford retirement without additional savings or government support.
The conversation around retirement age is more complex than it appears. People want to retire comfortably, but with the current economic situation, they may have to adjust their expectations or work longer than planned. The best course of action is to save more, stay informed, and have a strategy in place.
FAQs
How much does the average American retiree save?
The average retiree saves $269,078 for retirement.
What’s the recommended retirement savings amount?
Financial advisors suggest saving about $572,000 for retirement.
At what age do most Americans expect to retire?
Most Americans expect to retire at age 67.
Why do many people retire earlier than planned?
Health issues and layoffs often force early retirement.
What percentage of people are unsure about retiring?
Around 47% are unsure they’ll retire when expected.
