Retirement Age: Expectation vs. Reality

by Paul Ruedi

Earlier this year, Gallup conducted a survey that included people approaching retirement and people who were already retired. There were several interesting data points that came out of this survey, but one of the most interesting things to me as a retirement planner is the gap between when people expect they will retire, and when they actually retire. 

When pre-retirees were asked about the age they think they will retire, the average response was age 66. Retiring at 66 would put the wind at retirees’ backs for several reasons. Though they may be a few months short of full retirement age, people who claim Social Security at this age largely avoid the benefit reductions applied to people who claim early. Perhaps even more significant is the fact that people qualify for Medicare at age 65, which takes care of a large piece of the retirement puzzle. 

The only problem is, when the retired people in the survey were asked when they actually retired, the average response was age 61. Even worse, the vast majority of people who retired earlier than expected did not do so by choice; they were more or less forced into retirement by external circumstances. 

This gap was not just an anomaly of the Gallup poll. It is something we have known about in our industry for a long time. This gap was also mirrored by another study done by the Employee Benefit Research Institute this year. They found that the median expected retirement age was 65, while the median actual retirement age was only 62.

This has the potential to be a real issue for people for the reasons I hinted at earlier. Retirees are not able to immediately claim Social Security at age 61, and if they are forced to claim sooner than expected at age 62 it will be at a significantly reduced benefit amount for life. They will also need to find health insurance coverage for the years before Medicare kicks in, which can be very costly.

People who think their retirement is 5 or even 10 years away should be aware that retirement could arrive sooner than expected. Do your best to prepare in advance with the resources you have. If you are one of the people who end up retiring sooner than expected, don’t panic. But you will need to quickly orient yourself in retirement and establish a retirement spending plan as soon as possible. If you need help with that, you may want to talk to a retirement planner.

Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.