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Pre-Retirees Underestimate How Soon They Will Retire – By up to 7 Years

Category: Retirement Planning

July 26 , 2016 — A recent study of those who are about to retire vs. people who have already retireed reveals a sobering fact – pre-retirees tend to dramatically underestimate when they will retire. That underestimate is huge – between 5 and 7 years. While it displays a healthy desire to keep working, it does not appear to be realistic, given the experience of those who have retired before them.

The main finding of the study is that in the USA actual retirees saved, on average, 28 years for retirement. Pre-retirees, however, say they will save for 35 years, 7 years higher. To some extent the higher figure reflects caution and better savings intentions. But for most of them, the study concludes, it is wishful thinking.

The survey, “Future of Retirement – Generations and Journeys” was done by HSBC and covers many other retirement issues. While some people are happy to retire before their planned start date, many are not. A big reason why is that missing out on years of work means more meager retirement savings, 401(k) balances, Social Security payments, and pension payouts. And that usually results in a retirement that is not as financially secure as planned.

Many reasons why you might retire sooner than you think
This is not the first study that reports people tend to retire sooner than they say the plan to (see Further Reading below). The reasons for earlier than planned retirement are often beyond workers’ control. All kinds of issues can drive folks in their late 50s to retire before their stated goal in the 60s.
– Health issues – A stroke, injury, or serious illness could end your working days
– Termination and layoffs – Your job looked secure one moment, the next you are on the street
– The retirement of a spouse – You might decide to join him or her and be retired too
– A change in management or boss – Perhaps there was a merger, or the colleague you never liked takes over the reins
– Need to take care of a spouse or parent – Sometimes the only solution is for you to quit work to take care of them
– Moving to a new location – Perhaps you have to move for health reasons, or you want to be near grandchildren
– Time to call it quits – The stress of your job or boredom makes you quit

The “Future of Retirement – Generations and Journeys” survey also highlighted a number of other facts about retirement preparation. One of those is number of years Americans spend working vs. workers in the rest of the world – we work 35 years on average vs. 30 years for the rest of the world. Another is the small but significant part of America’s working population that has not started saving for retirement at all – 17% for women and 10% among men. A huge percentage (44%) of pre-retirees who wish that they had started saving earlier. Men start saving on average at age 29, but women push this out even longer, to age 34. The survey also found that while most working people (59%) rate financial security as one of their most important life goals, only 22% have ever received any advice or information on how to do it.

So what can you do to prepare – in case you end up retiring sooner rather than later?
The evidence is clear that unanticipated factors bring about early retirements. The best plan is to try to prepare for this event, which can have devastating implications. The study recommended four steps for a financially secure retirement:

1. Map out all your retirement expenses. Many people overlook paying off their credit card or other debts, for example. Extra health care expenses are bound to happen as you age, yet most people do not allow for them

2. Save early and often for retirement. The sooner you start, the more you will have and the more it can grow.

3. Get professional advice. Most people don’t try to doctor themselves or be the architects for their homes – they rely on a professional. Finding a good one takes some work, but it can pay off.

4. Get ready for the unexpected. No matter how meticulous your budget preparation (and most people’s are anything but), there will be bills you hadn’t considered – like a child or grandchild who has an emergency, a big medical expense, need for a new car, un-reimbursed damage to your home, a new roof or air conditioning system, etc.

For further reading:
What Causes Workers to Retire Before They Plan
What Derails a Planned Retirement Date
SquaredAwayBlog – Not Everyone Can Work’Till 70 to Retire

Comments: When do you plan on retiring? Or if you already did, was it when you thought you would? What kinds of factors might make you retire earlier or sooner? Please share your experiences in the Comments section below.

Posted by Admin on July 26th, 2016


  1. Important info. The 2016 EBRI Retirement Confidence Survey found that 46% of people retired earlier than planned, and very few did so because they won the lottery or received a huge inheritance.

    The other big surprise is working in retirement. Although 67% of pre-retirees said they planned to work after leaving their primary career, only 23% actually did.

    So, be careful of expectations vs. reality!

    by Jan Cullinane — July 27, 2016

  2. Jan, my experience matches the findings of the EBRI survey. I retired 5 years earlier than I expected to because my place of work offered some of us who had been around a while and who were over 55 a “retirement incentive” that was too good to pass up. I took it and thought I’d try looking for a part-time job in my field. Well, I didn’t look very hard and never worked for pay again. I do, however, volunteer my time with a couple of organizations. I feel fortunate in that I have saved enough for retirement and travel and haven’t any financial worries. I am enjoying it all.

    by Libra — July 27, 2016

  3. I planned on working till maybe 65 years old. However I lost my last job to lay off in 2011 at age 58. Due to the economy Unemployment benefits were extended to 73 weeks and that helped a lot. I decided to call it quits and took SS at age 62 1/2. I don’t feel as if I am retired because I never got into that frame of mind. I went from working, unemployed then finally collecting SS. If I had made the decision to retire I would feel like I stepped into my next adventure. For some reason I just feel unemployed! I always dreamed of retirement but on my own terms. DIdn’t happen that way! However, I had another job besides my last job that paid really well and I saved like crazy (till it hurt) and spent a lot too. Could have done better saving but I have no regrets. We travelled a lot, built a new home when we were age 21 & 23, had new cars and really wanted for nothing. But we really worked hard and never turned down overtime. Like they say, ‘make hay while the sun shines’. My words of wisdom would be to not get in over your head with credit cards, get your affairs in order because you never know when your last working day will happen. At my last employer the HR department waited till 3 pm on a Friday to tell me I was laid off . They shut down my computer so I couldn’t log on it. A very sad day for me because I loved my job. They laid off others too.

    by Louise — July 27, 2016

  4. My situation was similar to Louise’s in that I was laid off at 59. Looking over the list in the article, a layoff was the reason I stopped working, and boredom/it was time is why I didn’t try to find something else. It’s now coming up on three years of retirement and neither of us has any desire to go back to work at this time. Fortunately, we always were careful with our money and saved like crazy. And that is my advice, because you just never know when your working life will be over. And life is just too short to have to work until you drop.

    by Ray — July 27, 2016

  5. I was planning to retire at 62 .5 but just before turning 55 I was transferred and it increased my commute from half an hour ( one way ) to at least one and a half hours also one way. So out the door I went and then with in three months the economy went and I lost about half my savings but figured if I could hang on until it rebounded I would be okay, (good bye house, hello renting or mobile home). Now I have adjusted to my new standard of living and accepted my new life style ( not to tough to do, really) and life is actually very good just not quite the one I had planned for. The biggest losers in this is my kids, there will not be as much left for them to inherit if anything.

    by Steve — July 27, 2016

  6. Wow, sounds like the magic number for being layer off is at 58 or59, like me…..I was prepared for months so it wasn’t a surprise. Actually happy about it and found out the company closed 2 yrs later. I am now homecaring my mother who has dementia and contemplating starting my SS at 62 but that would mean losing my health benefits thru Obama Care so don’t know if I should hold off until I can claim Medicare or invest the money I do receive from SS.

    by Mary11 — July 28, 2016

  7. I planned to retire at 70 but my position was eliminated. I did work for another year in the position before “retiring” at age 67. Since paying off our house at age 55 we had been saving in a major way, even though we had saved for many years before age 55. Those last three years were going to be significant. I now work four part-time jobs to fill the gap to age 70. All our needs are being met and as long as our health continues it will be an enjoyable “retirement.” Planning ahead is critical even though it doesn’t always work out the way you plan. At least you have significant items in place for even the unknown.

    by Ralph — July 28, 2016

  8. Mary11, I am on SS at age 62 almost 63 and have Obamacare. Plan to be on it till I reach age 65 and eligible for Medicare. You should have no issues staying on it unless the next President does away with it.

    Good luck taking care of your mother. I did so for a while with my Mom till she passed and it is not easy.

    by Louise — July 28, 2016

  9. One thing I would like to offer in regard to saving money is this. If you make a certain salary and living within your means when/if you get an increase in wages as an example 3% increase, save it! If you have a 401K increase your savings by 3%. You will never miss it! If you don’t have a 401K put that 3% aside into a credit union or if you have auto deposit of your paycheck to your checking arrange for an automatic transfer into your savings. At the end of the year buy a Roth IRA or regular IRA. My Hub and I did this for years and felt a bit ‘poor’ but our 401K’s grew and grew! Our bills were still getting paid, we went on vacations and truly enjoyed ourselves. The other upside of this is that we didn’t have to transition much from paychecks to SS. Our SS checks are a bit over average and we take some additional income from investments. Oh, and we also got money back from our State and Federal government from Income taxes. So what I do with the annuity money and State and Federal return money is to break it down by 12 (months) and each month I deposit 1/12th. It is tempting for some people to withdraw/borrow from 401K before retirement but I wouldn’t recommend it unless it is for a dire emergency. Just my 2 cents for what it is worth!

    by Louise — July 28, 2016

  10. Like so many others before us, we fully expected to work, at least, until 65. Then they upped the Full Retirement Age to 66+. Now my husband has Parkinsons and will be just 60 this August. So, we are pretty sure he won’t be able to last until 66+. His employer has repeatedly offered early retirement buy-out packages over the last few years – obviously to clean house and get rid of the older workers. We have managed to avoid that so far but in the next year or two we’ll be forced to take it and run. We have tried to save over the years but our financial advisors think we may come up short. (which we’ll just have to deal with) Three sons are through college with no debt and other than a mortgage & 2 more years of a car payment, we have no debt. But, yes, things didn’t quite go according to plan.

    by Flatearth6 — July 29, 2016

  11. Here is a Social Security Calculator that is very interesting.

    by Louise — July 29, 2016

  12. Approaching 64, and expecting a layoff at any time. I had originally planned to work until 66. As work stress increased, I decided to move that date back to 65 to reach Medicare entitlement. At this point I think it’s unlikely that I’ll make it another year+ in our corporate environment. Ongoing layoffs are affecting older, highly compensated employees heavily.

    Realistically, I’m also running out of steam. It’s harder and harder to get up early every morning, commute in heavy traffic and spend long miserable days in a very high-stress environment (plus work on many weekends.) It wasn’t easy in my 40s and 50s, but it’s even tougher in my 60s.

    It would be helpful to have the extra year or two of wages, but I’ll be ok financially. And I’d probably add a few years to my life by getting out of a stressful career a year earlier! Some of my coworkers in their 60s are being diagnosed with heart disease and cancer. I’m sure stress has contributed.

    by Kate — July 30, 2016

  13. Has anyone considered another career after losing your job? After battling 2 cancers in 5 years, I feel so blessed. I was 58 when diagnosed and now am almost 65. My career fell by the wayside during my treatments and recovery, but because I am divorced and had a child in college, I had to find a way to make a living. For the past 22 years, I have been teaching in a high poverty school about an hour away from me. It is meaningful work and fills me with joy to be able to give back. The pay isn’t very good, but good enough to get by without taking SS yet. It also pays medical insurance, which for me was huge.

    I need to figure out when it would be advantageous for me to start taking SS without it all goingto taxes, as I live in anstate that fully taxes SS. I also need to figure out whether to sell my home and invest the equity and rent a small apartment. I have no pension, but have retirement savings. There is so much to figure out and I don’t know where to turn for advice.
    Anyone have any suggestions about where to start sorting this out?

    by MaryNB — July 30, 2016

  14. Oops…I meant to type for the past 2 years, NOT 22 years…….

    by MaryNB — July 30, 2016

  15. MaryNB, Hub and I have a financial advisor and she has invested our money very nicely. If you were to sell your house and take maybe 70% (as an example) of the sale then have an advisor invest it they can probably arrange a yearly stream of income for you to supplement SS. I would set aside some cash money (30% as an example) for all those unexpected things. You can go to a Bank to speak to a financial advisor.

    Remember, Medicare Part B (doctor tests), Medicare Part D (prescriptions) will come out of your SS check and Medicare Part F (Medigap) you have to pay on your own and in your State Part F might have another letter rather than F. Prices vary from State to State. My Hub is going on Medicare next year and at this years prices, as an example, we expect to spend approximately $365.00 a month. I will know the prices better later this year.

    You might also consider working part time. When you reach full retirement age and I am assuming that age might be 66 years old you will not be penalized. Before full retirement age there is a maximum per year you can make or they reduce your SS check. When you finally quit working altogether, SS will adjust your SS amount again. They take it but then they give it back! I worked for a year at a hospital and there was a ‘retired’ woman who filled in when one of the women in my department called in sick or were on vacation. Towards the end of the year she would have to stop working so she wouldn’t go over the cut off amount of money.

    Another thing to consider, if you were married for 10 years or more you can collect on your ex-husbands SS and leave yours to grow till your are at FRA or older. I am not all that familiar with that but you can call your SS office and find out or visit the SS website.

    Good luck to you!

    by Louise — July 30, 2016

  16. Thanks, Louise. I am going to make an appointment at SS on Monday. Right now, I am covered by my employer for all medical insurance, dental, vision. It’s a really good plan and I don’t know whether SS requires that I go on at age 65. It will cost me a lot more to go on SS than what I have now, i hope I can stay on my employer’s plan. Does anyone know whether I have to go on at age 65?

    by MaryNB — July 30, 2016

  17. MaryNB, This article explains your question:

    We have Obamacare and so far it has been paying a good portion of our health care. It is cheaper than Medicare but we are paying a lot out of pocket. I think when we get on Medicare and the other portions of Medicare we will be better off even though Medicare is a bit more expensive. Buy buying Part B and F we will have less out of pocket expenses.

    by Louise — July 30, 2016

  18. MaryNB,
    I would discuss with the SS representative regarding when to sign up for Medicare. There can be problems with not taking Medicare when you turn 65. I purchased the book Social Security/Medicare for dummies and it was very helpful in better understanding these two very complex benefits.

    by Jim C — July 30, 2016

  19. Thanks Jim and Louise..great suggestions.

    by MaryNB — July 31, 2016

  20. MaryNB: You don’t go on Medicare if you’re still employed and covered by your employer’s plan. But you still need to sign up for Medicare, preferably before you’re 65. Don’t know why that’s the way it works, but it is. I went through that.

    by Linda — July 31, 2016

  21. From Your Editor:
    Although Medicare is certainly related to retirement, especially early retirement, there are better threads for Medicare discussions at Topretirements. We recommend that you post questions and comments related to that subject to one of these posts, where they fit better and you will find a lot of help:
    So You are Turning 65 – Medicare Guide 101
    (3 part series)
    Don’t Make These 5 Medicare Mistakes

    by Admin — August 1, 2016

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