Why many Americans don’t retire on their own terms

A third of middle-class adults in a long-running annual survey said they don’t see themselves retiring before age 70 — if at all — yet just 10% of current retirees in the survey retired at age 70 or older.

The 26^th annual Transamerica Retirement Survey sheds light on the reasons retirement age expectations and retirement reality often don’t line up.

“The middle class has aspirations of extending their working years and fully retiring beyond traditional retirement age,” Catherine Collinson, CEO and president of Transamerica Institute and Transamerica Center for Retirement Studies, said in a news release. “This can be a good strategy for bringing in income and bridging retirement savings gaps — if they can remain healthy and employable as they grow older.”

In the survey of more than 7,600 Americans with a household income between $50,000 and $199,999, 70% of respondents who have yet to retire predicted they’ll be at least 65 before doing so. Yet, 63 was the median age at which survey respondents who have already retired did so.

What exactly is at work here?

In many cases, the choice is taken away for a variety of reasons. Fifty-seven percent of retirees walked away before age 65 — earlier than 48% had intended. Among those who retired earlier than intended, more than half (53%) cited employment-related reasons as a factor in early retirement.

Among those not yet retired, 45% are worried about the possibility of artificial intelligence advances making their job skills outdated.

“Many middle-class workers are worried about job obsolescence,” Collinson said.

A third of those retiring earlier than planned cited personal health as a contributing factor. Just 14% picked having saved enough money as a factor in their decision.

The role of Social Security

Only a quarter of respondents strongly agreed that they are currently building (or have built) a large enough retirement nest egg, and 80% of those not yet retired said that today’s high cost of living presents a major obstacle to saving.

While 42% of all respondents view 401(k)s, IRAs, and similar self-funded savings as their primary source of retirement income, 28% view Social Security as their primary source, up from 23% a year ago. Yet, 74% said they’re concerned that Social Security “won’t be there” for them come retirement.

“The middle class is encountering formidable headwinds that make it challenging to adequately save for retirement,” Collinson said. 

Just 33% of all respondents said they’re working with a professional financial adviser.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.