Retire when? Expectations and reality diverge in the US

Most people realize they can't retire when they'd like to, and working longer is now a reality.

The concept of retirement is changing, and many people preparing for it are realizing that they can’t fully quit their working lives as soon as they’d like.

The reality is working longer or taking a gradual retirement, where part-time jobs help bridge financial gaps.

The average age at which people in the U.S. would like to retire is 59.4, although the average age they feel they will actually retire is 66.8, according to results of a survey recently published by life insurance settlement company Coventry Direct. Expectations differ across the country, with Nevada residents saying they like to retire youngest, at 57.7, and Connecticut residents pegging the oldest preferred retirement age among the states, at 63.6.

The state with the smallest gap between the age of preferred retirement (59.1) and expected retirement (63.2) was California, at over 4 years, according to the Coventry survey. The state with the biggest gap was Rhode Island, where people on average said they wanted to retire at 59.3 but expected to retire at 71.8, a difference of 12.5 years.

“Most people see retirement as a break from constant work stress, but they often don’t have detailed plans for their daily activities once they retire. They just know they want to be free from the daily grind,” Joseph Boughan, owner of Parkmount Financial Partners, said in an email.

About 1 in 5 clients usually needs to make considerable changes to meet the retirement goals they have in mind, Boughan said.

“In most cases when we recommend adjustments to get on track, we start the option to work part-time in an early ‘pre’ retirement to help them have less stress, and enjoy a partial retirement on more favorable terms,” he said. “But investments allocations, savings rates [and] lifestyle are all factors worth considering and could be significant levers that help them get closer to their desired retirement goals.”

Conversely, some clients must be convinced that they can retire sooner than they were anticipating.

“A client (currently 60 years old) recently came to us with an expectation of retiring at age 68 and having $2 million in investible assets,” Francisco Ayala, financial life planner at The Coleridge Group, said in an email. “However, due to their modest lifestyle and goals, these numbers were excessively conservative. I showed him that he can easily retire at age 65 and not reach his investible asset figure and still have a high probability of funding retirement even in the most conservative scenarios.”

That may not the be case for many retirement savers. But more than half of U.S. adults say that they plan to work in “retirement” anyway, motivated as much by personal fulfillment as much as financial necessity. Sixty-four percent of baby boomers and Gen Xers said they were opening to working indefinitely, according to results of a survey published last month by Empower. Forty-one percent of those who planned to work later in life cited fulfillment as a contributing factor, compared with 40% who said that the decision would be driven by financial needs.

Separately, a recent survey from SoFi found that most people of all ages are motivated to cut major expenses as a way to save more and retiree younger. Among those 18 to 75, about two-thirds said they’d happily pare down their dining-out habits or go as far as avoiding having an expensive wedding in order to do so.