The Center for Retirement Research at Boston College asks and answers an important question, “More than a third of older workers retire earlier than planned: the question is why?”
Aside from comedy-heist films of protagonists lounging on the beach sipping drinks in a Paradise Found cliché what—exactly—causes individuals to stop working?
The new issue brief from Alicia Munnell and the CRR team takes a look at 1) the impact of unexpected changes in health, employment, family, and finances on early retirement; and 2) the prevalence of these shocks.
“Many workers seem to have gotten the message that working longer may be necessary to boost their retirement security,” the authors note. “The share of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent in 2018. But such intentions often go awry; data from the Health and Retirement Study indicate that 37 percent of workers retire earlier than planned. This brief, based on a recent paper, reports on a ‘horse race’ to identify which unexpected changes (or ‘shocks’) are most likely to interfere with retirement plans.”
The findings?
“[B]oth poor initial health and changes in health—is the biggest driver of early retirement, mainly because many people have some initial health problems at the time they report a planned retirement
age and many also experience a deterioration in their health after that point.”
Health is followed by job loss without finding a new job, which “while not as prevalent, is also important.”
Lastly, family transitions “have a modest impact, while financial shocks appear to have little effect.”
“A key caveat is that all the shocks combined explain only about a quarter of earlier-than-planned retirements, so clearly other factors are also at play,” the brief adds.
As for the reasons for retirement other than shocks the authors (at this point) just aren’t sure.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.