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Americans are retiring on average sooner than expected

Yahoo Finance senior columnist Kerry Hannon breaks down a new poll that shows a gap between the actual and expected retirement age.

Video Transcript

- All right. Well, the gap between expectations versus reality of retirement are getting wider. A new Gallup poll shows Americans expect to retire at 66 years old. But they're actually retiring at 61 years old. Yahoo Finance senior columnist Kerry Hannon is here to help us break this down. So Kerry, how concerning is this gap?

KERRY HANNON: I got to tell you, it concerns me because what happens is people are retiring earlier than they expect to. And they're simply not prepared for it. And they say that the reason that they're retiring is mostly out of their control. I mean, half of the people-- another survey recently from the Employee Benefits Research Institute showed that half of people who are retired said they retired earlier than expected.

This is an issue because they haven't really put their plan together. And as you and I have talked about quite a bit, I'm a big fan of work. And the longer you can work and keep earning, contributing to retirement accounts, and not taking Social Security, you're really going to be in a better position for your future financial security. But I think that people because of health reasons is one of the main reasons they step out of the workplace.

It's caring for an aging individual, a family member of some sort. It's a disability of some kind. It may simply be a downsizing from their employer. Any of these situations is something that sort of comes up. So I think there's this human optimism that we're going to work longer. But there's generally this five-year gap that people see-- Gallup has seen this over time, is that what people say, 66 now, but actually they're retiring at 61.

So that is something we need to think about. And there are good ways I think that some major change is coming out of the pandemic to the workplace that have fundamentally changed things that may very well help people stay in the workplace a bit longer.

- What are those changes? And Kerry, what's the overall impact to the economy of these early retirements?

KERRY HANNON: Well, good question. And thank you for asking that because it is a big impact to the economy. When people aren't earning, they aren't paying taxes on that money. Maybe they are taking their Social Security. This is really important. You want people to be engaged in the workplace. This is good for the economy. And so the big changes that we talk about that we've seen coming out are, yeah, remote work is here to stay. And so is contract work. It's really lit up these two things.

These are important because if you're a remote worker and you have a health issue that maybe makes that commute to the office harder or the office isn't set up ergonomically to suit whatever your disability is, well, my goodness, if you can work remotely, this can keep you on the job, as can a contract job because, let me tell you, ageism is alive and well in the workplace. And if you've been downsized, it's super hard to get back in. You have to really work at it.

And an employer who can bring you on in a contract basis may very well say, hey, OK, let's try this out. I'm going to test it out and see if you fit in with the rest of the troupe. And if you do, this could really lead to a full-time job. But even so, even if it's just a contract position you get, you're keeping your resume alive so that you have a better chance of getting back into the workplace if you don't want to be officially retired. And as we saw coming into this year, 2022, a lot of people retired and unretired because of inflation and the stock market being a little uneven, let's say.

- Excellent stuff. And good tips for all of us, quite frankly. Kerry Hannon, thanks so much. Appreciate it.