Ever talk with someone about retirement, and hear that they’re going to need to work until they’re 70? Or that they’ll have to keep working forever? Even though a lot of folks in the financial media will tell you to delay retirement until 70, there’s a good reason to plan a much earlier retirement than that.
In fact, everyone should plan to retire early – even if they don’t want to, or don’t intend to.
Today, I’m going to make the case that even if you hate the FIRE movement (like someone?) you should financially plan to retire early. Don’t get out your pitchforks – I’m not advocating everyone retire at 35 and travel the world, or something like that.
I’m going to educate you on the cold hard facts about why planning to work into your late 60’s or 70’s will not work – and what you can do about it.
Lets explore.
Why Everyone Should Plan To Retire Early
Retiring Before 70 – “Early” Retirement?
Quite a bit of the advice to wait until age seventy to retire comes from planning for Social Security. Every year you wait after hitting your “full retirement age” (65 if you were born 1937 or earlier; 67 if you were born after) you’ll receive more money. You hit your maximum benefit by waiting until age 70 to collect benefits. Your benefits increase between six and eight percent – a risk free return you literally can’t get anywhere else.
Where have I seen this discussed? Check out:
- This article from CNBC, declaring that waiting until age 70 is best
- Five reasons to wait until 70 to collect Social Security from US News
- The best insurance policy on earth is waiting until 70 to collect Social Security, from PBS
- Everyone’s favorite, Suze Orman, claiming you SHOULD NOT retire or collect Social Security until 70
When did retiring at 70 become the “new normal”? It’s really not. According to this survey from U.S. News and World Report, most people plan to retire at 65. A quarter plan to retire sooner, and a quarter later.
But as they say:
“The best laid plans of mice and men often go awry. .”
Expected Versus Actual Retirement Age
As usual in life, people are very optimistic about the control they’re going to have over their future situation. Their current employment will remain stable, and they (and their family) will remain healthy. Bad things might happen, but those will happen to other people.
For those not anywhere near your fifties or sixties – you’ll still want to read through this. Your future self will thank you. I am currently thirty eight, and I still think about stuff like this. You should too.
As they approach their sixties, they’ll find another reality colliding with the ideal their past self may have envisioned. They’ll have aging parents that require care, or care coordination. Perhaps their spouse will have a heart attack, stroke, or some other event and require care. They themselves may become disabled, or develop a chronic condition that makes working difficult. Or your children have children, and you want to help care for your grandchildren so they can go to work. Their employment situation may change – their employer closes, performs layoffs, or changes their needs and your job is no longer necessary.
It’s actually very hard to find a new, comparably paying job in your sixties.
Take a look at this interesting breakdown of actual versus expected retirement age from the Employee Benefit Research Institute (ERBI):
| Age | Expected | Actual |
|---|---|---|
| Before 60 | 9% | 35% |
| 60-64 | 18% | 32% |
| 65 | 23% | 11% |
| 66-69 | 11% | 7% |
| 70 or older | 22% | 9% |
| Never retire | 10% | N/A |
You’ll notice a huge difference in expectation versus reality. Thirty five percent of people retire before age sixty – that’s over a third! All in all, most people (55%) retire before sixty five. This is true even though only 20% of people expected to retire that soon.
Why People Actually Retire
So, if people want to retire later, why aren’t they just retiring later?
Well, remember that list of events in the last section that will happen to “other people”? Yes, it’s often one of those things. Specifically, we’re going to look at ERBI’s 2014 research on the topic.
CMO Note – sometime after I put this article up, ERBI took the PDF of this research down or moved it. You can access it from the WayBack machine.
All in all, about half of people retire earlier than planned.
But why?
- 61% retired due to health problems or disability
- 18% experienced a negative change at their company, like getting laid off or their employer shutting down
- 18% had to care for a spouse or other family member
- 22% cited “other work-related reasons” which could include feeling unwelcome
- 7% experienced changes in the skills required for their jobs
You’ll notice this adds up to over 100% – people can select multiple reasons. It’s sometimes not a single event, but a collection of events with one tipping point that brings folks into retirement.
So there you have it. Most people retire early, even though some of the headlines would have you thinking you can and should be planning to work into your seventies.
What The Data Means
Now you know the facts. Most people retire much earlier than they thought they would. A significant number – over a third! – retire in their 50’s or sooner (like our good FIRE friends). Creating a retirement plan as if you’re going to work late in life is just asking for financial disaster.
If you’re forced into early retirement before you’re financially ready, you’re going to be reliant on Social Security to make up the shortfall. You may have to live lean, downsizing your home for extra money, or pinch pennies every day.
You could end up like a poor elderly lady who once called into a call center where my mother was working, talking about how she lived on “one small bowl of food every day.”
It could result in you being unable to support yourself later in life. You may then need to rely on your children to assist you, forcing them to retire early (perpetuating a cycle) – or rely on the government to save you.
None of these situations are likely how you’re going to want to spend your “golden years”.
So…
What Can You Do About It?
No matter what your age now – in your 20’s, 30’s, 40’s, or approaching traditional retirement – you can take actions to help set yourself up for “reFIREment“, rather than be forced into a meager retirement existence.
So what can you do?
Picture what kind of existence you want to have in your 50’s, 60’s, and beyond.
If you do retire medical care, or living assistance, what kind of facility would you want to be in? Do you want to retire early to have time to travel and have fun? Picturing your older self is shown to make you think more concretely about retirement. There are even aging apps that can do this for you.
Study the facts above, and plan as if they were true for you.
We all like to live in a bubble of magical thinking, where bad things don’t happen and life goes off exactly as we planned. And none of us actually live in that world (unfortunately for us). So study the reasons that people retire earlier than expected, and plan as if they will happen to you.
You likely want to plan financially as if you’re retiring before sixty.
A third of people actually retire before sixty, and most retire before 65. So even if you don’t want to retire in your 30’s or 40’s, your financial plan should allow you to retire in your 50’s. Even if you fully intend to keep working, life might happen.
Just because you plan as if you’ll retire, doesn’t mean you have to – or will.
Don’t confuse planning to retire before sixty, with actually retiring before sixty. You can of course continue to work. Having a solid financial plan that allows you to retire before sixty is intended to give you the right safety net, in case life happens to you. You don’t want to end up being one of the people living on one small bowl of food a day. Working at sixty, seventy, or beyond is fine for some folks!
For some inspiration on working longer, check out this 107 year old barber, still cutting hair full time to this day. And he’s still not planning to retire. Feeling fine!
The Bottom Line
The bottom line is that even the staunchest proponent against “early retirement” is likely going to end up retiring early. People in the media who give ordinary folks the advice that they should plan as if they’re retiring at 65, 67, or 70 are doing them a disservice.
Even if you really, truly, with every fiber of your being want to continue to work into your seventies, it’s likely you’ll be unable to for one reason or another.
Plan accordingly.
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I really like your tip on financially planning your retirement as if you want to retire at certain period of your life like in your 50s or early 60s. It gives them a goal to focus on and even if you want to work beyond that time frame.
Liz,
Your list of reasons that our hands are forced before we’d planned on retirement are alarming: any of those reasons might apply to any of us suddenly and in a devastating manner and rob us of our fantasy future. There but for the grace go I…
Your husband’s surgery and subsequent sepsis with his eventual (thankful!) recovery are never far from my mind when I think of how all my long-term planning might be upset with the speed and absurd logic of Greek gods making drunk wagers high on Olympus.
No down side to constructing that umbrella, even if it never rains. You continue to scare the crap out of this physician blogger, but I say that with greatest respect and admiration.
Fondly,
CD
Liz,
Your list of reasons that our hands are forced before we’d planned on retirement are alarming: any of those reasons might apply to any of us suddenly and in a devastating manner and rob us of our fantasy future. There but for the grace go I…
Your husband’s surgery and subsequent sepsis with his eventual (thankful!) recovery are never far from my mind when I think of how all my long-term planning might be upset with the speed and absurd logic of Greek gods making drunk wagers high on Olympus.
No down side to constructing that umbrella, even if it never rains. You continue to scare the crap out of this physician, but I say that with greatest respect and admiration.
Fondly,
CD
Maybe I should put that on my business cards next year-scaring the crap out of people since 2018 😆
Great post. I always planned to retire early but now at 61 I guess that ship has sailed. If you continue to work after FI you can slow down and cushion your future. I have been working for a cushion for a good while now. Over saving gives one a true sense of security I think. As you said if you plan for early retirement you do not have to do it.
It’s so true-and a point I think many people miss. Especially people in their 30’s and 40’s who think their 50’s and 60’s are really far away. My thought is it’s not as far as they think.
Love the word reFIREment. I agree that we should all plan for early retirement but they doesn’t mean you have to retire early. All it means is you will have a lot of options at that time and if you want to work so be it but if you want to do something that pays less or volunteer you can do that at that point instead since you will be financially independent.
It is never to early to plan for retirement and people in their 20s and 30s can really set themselves up at this age.
Anything can indeed happen. Health is not guaranteed and who knows what ailments may crop up that could prevent you from continuing to work.
Planning so we would be capable or retiring or going part time by 55. Saw my dad forced to retire due to downsizing and age discrimination. Health issues would have likely caused problem in a year or two anyway. Concerned that my own chronic condition might force any early retirement. So want to be prepared just in case.
Liz,
I love this for so many reasons. I think a lot of people are getting caught up in the idea of retiring in your 30’s, but FIRE is much more than that.
It’s all about having a plan, any plan, and adjusting it as your life adjusts. Things happen and plans fail so it’s great to just be conscious of what is happening with your money.
Great post and I couldn’t agree more. Reaching FI is beneficial for so many reasons; many you can’t control down the road. The RE aspects are more of a personal choice IMHO. I’m in my late 50s, reached FI, and I will determine when I retire. It will be “early” compared to many, but the important thing to me is I totally control when I retire. It is my choice, which allows me to live with a lot less stress and a lot more happiness.
Thanks for the post! I’m prepping to put together our first newlywed budget… and this may help to reign in my free spirit.
Really like this breakdown!!!
in a flipant nutshell, nobody ever regretted saving money
I was one of those guys who planned on working til 70 but not because I wasn’t financially independent but because I enjoyed my career too much to walk away. Fortunately I stopped needing to earn money in my 50’s and when an ownership change occurred in the company I worked at made my work gradually stop being my favorite hobby it was easy for me to walk away from the 9 to 5. I guess I’m a poster child for why saving fairly aggressively gives you options. Now I side gig for fun and money I don’t need and blog and volunteer for fun and fulfillment and I’m living the best life I ever have! Great advice from blogs like yours helped open my eyes to the fact I did not have to stay in a job I no longer enjoyed. Thanks!
Now in my 40s I’ve seen each one of these events happen to at least one person I know. My old employer laid off so many employees that were biding their time and waiting for a pension and long term health care benefits. When they were cut some of them had no savings and were unable to find a job because they allowed their skills to wane. This is a reminder to prepare for these scenarios and if you plan to work to continue to learn and bone up on your skills for as long as you have a job. It’s too easy to become complacent.
Great article!
I tried looking up the ERBI data research but the links seem broken. I’m a bit surprised at the list of reasons why people retired earlier than planned. Is that list exhaustive? Every option is negative, which might be accurate, or simply how the study is conducted, but I’m surprised that no one ever answered that they retired earlier than expected simply because they could. I’m sure that’s not the case in the majority of cases, but I also feel like some people retire earlier than originally expected just because they come to the realization that they can, and decides to go that way as a choice.
No the list wasn’t exhaustive-there were other reasons provided too. I’ll check the links later, thanks for the heads up.
I learned this lesson in my late 20s when I watched so many colleagues lose their jobs during the Great Recession. I survived because I was young, low on the pay scale, and there weren’t enough of my in our office to do my job (we were too VP/Director heavy). A number of my colleagues were in their 50s or just ready to retire, but not quite there. Once the stock market dropped and took their investments along with it, they couldn’t afford to retire. It scared me. I was already a saver and never planned to work full time until traditional retirement age anyway, so I had a head start in that sense. Even so, it was a good lesson to learn!
Now that I’ve changed careers and am a nurse, I can assure you that I see stories all the time of people experiencing unexpected health problems. Americans overall do not take care of themselves. One colleague’s husband was just forced out of the work place due to his age and declining health, but they had planned on him working a few more years. I get the impression they’re experiencing some financial concerns now and her plans for an early retirement have been ruined. She has to support them now. Scary and sad stuff!