American workers by and large believe they'll retire at 65, the nation's traditional retirement age. But real life often gets in the way of those plans, with new research finding that the majority actually step back from work far earlier. And for many, it's not by choice.
The median retirement age for Americans is actually 62, meaning that the typical worker is stepping back from their career three years earlier than expected, according to new research from the Employee Benefit Research Institute, a nonprofit focused on employee benefit programs.
The findings underscore the gap between retirement goals and reality. One increasingly popular idea, often promoted by lawmakers and business leaders, is that Americans should work longer so they can better afford their golden years. Because millions of workers are woefully lacking in retirement savings, working longer is seen as a way to solve their funding gap. In reality, however, many U.S. seniors are forced into retirement before they're ready.
But even when people want to work longer, they're not always able to, the new research found.
"It's hard to make that case that everyone should work longer and that will solve the problems we have in retirement," Craig Copeland, director of wealth benefits research at EBRI, told CBS MoneyWatch. "That clearly won't solve all the problems because many people just can't do it."
Only about 2 in 5 said they stopped working earlier than expected because they could afford to do so, the research found.
Within that gap between expectations and reality lies the potential for some troubling outcomes. For instance, workers who plan to retire at 65, but are forced to stop working years earlier, might not have enough saved.
Already, many older Americans lack any retirement savings, with a new AARP study finding that 1 in 5 people over 50 have nothing saved for their old age.
Needed: $1.5 million
The new EBRI study, which polled 1,255 workers and 1,266 retirees in January, found that only about half of workers have calculated how much money they'll need in retirement. Of those who examined their financial retirement goals, about one-third believe they'll require at least $1.5 million, EBRI found.
Research indicates that the average worker believes they will need $1.46 million to retire comfortably. However, in reality, most Americans have significantly less, with about one-third of workers currently having less than $50,000 in savings and investments.
Americans may be aiming for large sums due to the general recommendation that individuals should have around 10 times their salary saved for retirement, as pointed out by experts. This means that for someone earning $100,000 or $150,000, aiming for $1.5 million is a straightforward way to reach that goal. While their retirement target may be realistic, the challenge lies in saving enough to achieve that amount.
Despite these financial concerns, many workers anticipate relying on Social Security as a source of income during retirement, even though the program is projected to encounter a funding shortfall within the next decade. If not addressed by 2033, retirees could potentially face significant cuts to their benefits, posing a worrisome prospect for those with limited retirement savings.
Nevertheless, current retirees generally express optimism about their retirement lifestyle, with a majority indicating that they are living the retirement they had envisioned. While the outlook for retirees is positive, the journey to reaching that point can be a stressful endeavor.
