What Derails a Planned Retirement Date

Workers are feeling very ambitious these days: one in three plans to retire after age 65. In the 1990s, just one in 10 did.

In reality, though, many older Americans today are retiring before they’d planned, resulting in lower monthly Social Security checks, slimmer 401(k) accounts, and more golden years to pay for.

There’s no shortage of research looking into what derails these plans. But, for the first time, a new study ran a statistical horse race among the various reasons known to impact older workers’ decisions. Health issues finished first in the race, followed by layoffs, and a spouse’s early retirement.

In an ideal world, eliminating these major shocks, along with a few less prevalent shocks that were also analyzed, would reduce the share of older workers retiring earlier than planned, from 37 percent to 27 percent.  [The remaining factors that were still unaccounted for in this analysis could be anything from not liking one’s job to financial or health events that went undetected by the survey.]

The analysis was limited to workers in a nationally representative survey who were age 58 at some time between 1992 and 2012. The survey asked when they expected to retire. The researchers then followed each person for up to a decade to determine who retired, whether the retirement was early or on schedule, and what intervening life changes might have caused a change in their stated plan. The changes tracked in each person’s health and cognitive abilities included stroke, diabetes, cancer, and difficulty dressing and reading a map.

The ranking was based on two things: 1) how likely one of these unanticipated life events was to bring on an earlier-than-planned retirement, and 2) the event’s prevalence in the population. For example, involuntary job losses frequently force premature retirements but hit a fairly small segment of the population, so they ranked behind deteriorating health, which is common among older people.

Financial problems should be critical to retirement decisions. But interestingly, money issues such as an increase in wealth had very little to do with the earlier-than-planned retirements. Another financial factor – the presence of retiree health care, which eases the cost of retiring – also didn’t influence the retirement dates.

It’s nice to think we’re in control of when we retire. But this research shows that events get in the way of our best-laid plans.

The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA or any agency of the federal government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.