Planning an early retirement is dream for many Americans, but for a significant share of those who stopped work before the traditional age of 65, it was not planned and not their choice.
A new report from Transamerica Center for Retirement Studies in collaboration with Transamerica Institute found that while around six in ten retirees who took part had stopped working before they had planned to, just one in five did so because they were financially able to do so.
For half of early retirees health-related issues (46%) or employment-related issues were the reason. Another 20% did so for reasons related to their family.
The median age of retirement for respondents was 62.
Social Security is an important source of income for many with 58% expecting it to be their primary income source throughout retirement. Of those receiving it already the median age they started was 63, reducing their payments compared to if they had waiting until they were fully retired at 66 or 67. Just 4% waited to claim until they were 70 or older.
The fragility of retirees’ finances is laid bare by the report with household income of less than $50,000 annually for more than one third in 2023, and savings totaling an estimated median of $70,000 excluding home equity.
And the prospect of long-term care is a concern for respondents with just 13% saying they could afford it, 13% having long-term care insurance, and 48% saying they would have to rely on family or friends to provide care rather than pay for nursing care.
"Retirement brings freedom and time for personal pursuits," said Catherine Collinson, CEO and president of Transamerica Institute and TCRS. "However, retirees are living on a fixed income with limited financial resources. Many would be unable to withstand a major financial shock, such as the need to pay for long-term care. Retirees' fragile financial situation serves as a cautionary tale that underscores the imperative for strengthening our retirement system."
The Retiree Life in the Post-Pandemic Economy report also found that 76% wish they had saved more and more consistently, 68% said they wish they had known more about investing and retirement saving, and half said their debts damaged their ability to save for retirement.
Retirees' current top financial priorities include building emergency savings (31%), just getting by to cover basic living expenses (29%), and continuing to save for retirement (24%). Many are also trying to pay off debts.
"Many retirees may wonder what they could have done differently to save and plan for retirement, and many may feel they have done everything right but still came up short," said Collinson. "In reality, over their working careers, the world has changed, the retirement landscape has evolved, and the need to self-fund a greater portion of one's retirement income has intensified."
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