People Are Retiring Early, Even When They're Not Ready

A significant number of Americans, 58%, retire earlier than planned, driven largely by health issues (38%) and workplace reorganizations (23%), according to studies by the Employee Benefit Research Institute (EBRI) and the Transamerica Center for Retirement Studies. While some retirees are financially prepared, most are not. Only 40% of early retirees leave work feeling financially ready, and half report saving less than needed. Rising living costs exacerbate the situation, with 31% of retirees in 2024 reporting expenses higher than they can afford—a stark increase from prior years.

Social Security remains the cornerstone of income for most retirees, providing about half the income for 80% of beneficiaries and acting as the primary income source for 58%. Additional income sources include workplace pensions or annuities (39%), IRAs (20%), and 401(k)s (17%), though these accounts contribute only modest portions of total income. Early retirees, however, face reduced Social Security benefits if they claim them before the full retirement age, usually 66 or 67. Retiring as early as 62 also results in the loss of wages, employer benefits, and investment growth, while increasing healthcare costs until Medicare eligibility at 65.

Beyond financial challenges, retirees grapple with emotional and practical concerns, including fears of outliving their savings, declining health, and loss of independence. Many prioritize building emergency funds (31%), continuing to save for retirement (24%), and managing basic living expenses (29%). These findings emphasize the urgent need for better retirement planning and a stronger financial system to support retirees facing longer lifespans and rising economic pressures.

For more information see Tracey Longo "People Are Retiring Early, Even When They're Not Ready" Financial Advisor, December 10, 2024. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.