Retirement at age 65 is no longer the goal for most working Americans. In 2010, for the first time, more Americans said they planned to retire after age 65 than before it, and since then the gap has widened, according to a recent Gallup survey of more than 2,000 U.S. adults, including 636 retirees. More than a third (37 percent) of workers say they expect to retire after 65, up significantly from 14 percent in 1995.
Only about a quarter (26 percent) of employees are still aiming to retire at 65. Another quarter (26 percent) of adults are hoping to retire before age 65, down from 49 percent in 1995.
People who are closer to age 65 generally project later retirement ages than younger workers. More than half of workers ages 58 to 64 plan to retire after age 65, compared with 36 percent of people in their early 50s, 38 percent of 30- and 40-somethings and just over a quarter (26 percent) of people under age 30. "People who are very near retirement age in their 50s and 60s are looking at their Social Security benefits, 401(k) balance, their cost of living, medical costs and food costs and have a better sense of what things might be like when they actually retire," says Jeffrey Jones, managing editor of Gallup Poll. "They are more aware that early retirement might not be as much of a realistic option for people today as it was 30 or 40 years ago."
Working longer. Individuals are pushing back their retirement age both because they need more time to save and because they enjoy many aspects of their jobs. Three-quarters (76 percent) of employees say they will continue working past retirement age, with 40 percent working because they want to and 35 percent because they will have to, Gallup found. Part-time work in retirement (61 percent) is greatly preferred to a full-time job (15 percent). But only 19 percent of those surveyed plan to completely stop working at retirement age by choice.
Individuals with high salaries are the most likely to want to stick with their jobs. Nearly half (49 percent) of those earning $75,000 or more say they plan to work past retirement age because they want to, compared to about a third of people earning less money. In contrast, people earning between $30,000 and $74,999 (39 percent) and especially employees earning less than $30,000 (43 percent) are more likely to continue working in retirement because it's necessary to maintain their standard of living.
Medicare eligibility. Qualifying for Medicare plays a big role in many people's retirement decisions. Medicare coverage can start as early as the month you turn age 65. People who retire before age 65 face the risk of being forced to pay high premiums for private health insurance or COBRA coverage, or even being denied health insurance altogether. "One of the greatest retirement costs people face, even if they are healthy, is medical care and health insurance," says Brent Neiser, a certified financial planner and a senior director at the National Endowment for Financial Education in Denver. "You probably do not want to get out of a reasonable health insurance situation before age 65 because if you have a gap that needs to be filled, it could be very expensive."
Higher Social Security retirement age. The increasing Social Security retirement age may also be inspiring people to work longer. While you can sign up for Social Security as early as age 62, your payments will be reduced unless you wait until your full retirement age to start payments. The full retirement age is 65 for everyone born in 1937 and earlier, but has since increased to 66 for most baby boomers and will further climb to 67 for everyone born in 1960 or later. "You are not tapping into the full potential of Social Security if you elect to claim Social Security before age 66 because it is significantly discounted. Some people might call it a haircut," Neiser says. "That smaller amount adds up to thousands and thousands of dollars less throughout your lifetime."
Social Security monthly payments will further increase if you delay your start date past full retirement age, up until age 70. "I think people tend to associate when they begin taking Social Security with when they retire, and I think it's really important to decouple those two events," says Tim Kober, a certified financial planner for Cedar Financial Advisors in Beaverton, Ore. "For most families and households, delaying Social Security is the single smartest and most financially savvy decision that you can make because for every year that you delay taking Social Security, your benefit increases 8 percent."
However, while the age workers expect to retire is growing, few retirees have been able to delay retirement past age 65. Just 17 percent of the retirees in the Gallup survey left the workforce after age 65. Currently, the average retirement age is 61, up from 57 in 1991. The most popular ages to retire are between 60 and 64 (36 percent). And 31 percent of seniors entered retirement before age 60.
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