Be Prepared: You Might Be Forced to Retire Earlier Than You Think

An elderly man kisses the wife of his hand who has her head on his shoulder.
Getty Images
Some of the links in this post are from our sponsors. We provide you with accurate, reliable information. Learn more about how we make money and select our advertising partners.

As we get older, a lot of us say to ourselves, “I can’t afford to retire. I’ll work until I’m 70.” Or even simpler: “I’m never retiring. I’ll just work till I’m dead.”

But the truth is, it rarely works out that way. The reality is, a lot of us will have to quit working earlier than we expected — either because of health problems or because we can’t get hired anywhere.

That may be a bummer, but that’s how it is. That’s one of the lessons we took away from a new survey of workers and retirees by an organization called the Employee Benefit Research Institute.

More than half of the retirees said that, because of circumstances beyond their control, they had to retire earlier than they’d planned.

Active workers are expecting to retire at a median age of 65. However, actual retirees reported that they really stopped working at a median age of 62.

In other words, be prepared: You might have to retire earlier than you think.

“There are a number of reasons people end up retiring earlier than they expect,” said Craig Copeland, a research director at EBRI, a nonprofit organization based in Washington, D.C.

“A lot of people get sick or become disabled, or there are changes at their job involving a layoff or a reorganization. The job they thought they could keep forever isn’t there anymore, and it’s harder to get a new job when you reach retirement age.”

Want to save for retirement but don’t know where to start? Our guide breaks down savings strategies by age and shows you how to make your retirement a priority.

The Gap Between Expectations and Reality for Retirees

This survey polled 1,320 workers and 1,217 retirees in January 2023. Its findings match up with what the organization’s surveys have found in previous years. “The numbers really haven’t budged,” Copeland said.

Among the questions asked was, “Did you retire earlier than planned, and if so, why?”

The results show a big gap between workers’ expectations and how things actually played out for retirees. Among the findings:

  • 1 in 3 workers expect to retire at age 70 or older, or not at all. However, only 6% of retirees reported that this was the case.
  • Just 11% of workers plan to retire before age 60, compared with 33% of retirees who reported they retired that early.
  • About 20% of workers plan to retire between the ages of 60 and 64. However, 35% of retirees said they retired in that age range.
  • Of those who retired earlier than expected, about 40% did so because of a health problem or disability, and another third retired early because they got laid off.
If you’re retiring in the next few years — or are recently retired — click here to answer a few questions and you'll receive a customized financial plan. It's totally free.

4 Ways to Plan for This Retirement Reality

Everyone who’s working needs to be aware of this reality — and needs to plan ahead. Here are four options to consider:

1. Max Out Your 401(k)

We know it’s difficult to save money when everything costs so much because of inflation. So many of us are financially stressed.

Having said that, see if you can save more for retirement. If you have a 401(k) plan through your employer, you should at least save enough to get the full employer match that’s being offered to you. If you’re not doing that, you’re basically passing up free money.

The average company match is 4.5%, according to a report from Vanguard.

What percentage of their pay does the average person put into their 401(k)? For men, it’s 7.5%. For women, it’s 7%, according to Vanguard.

The maximum 401(k) contribution in 2023 is $22,500, or $30,000 for those age 50 or older, but that’s not realistic for most people. Only about 14% of us actually max out our 401(k) plans each year, according to the IRS. Still, save what you can.

2. No 401(k)? Try an IRA

If you don’t have a 401(k) account through your workplace, open an individual retirement account, aka an IRA. The maximum you can contribute to your IRA is $6,500 per year.

People 50 and older can save another $1,000 per year on top of their contribution limit.

3. Use Your Health Savings Account for Retirement Planning

A health savings account can be another good retirement planning tool. It’s a tax-advantaged account that you can contribute to in order to pay for medical expenses.

As we age, medical expenses increase quickly. By maximizing your HSA contributions, investing them and leaving the balance untouched until you exit the workforce, you can create a nice health care nest egg for yourself. Here’s an article about that.

Plus, you’ll benefit from significant tax savings along the way.

Right now, in 2023, employees can contribute up to $3,850 to their HSA, while those with family health insurance coverage can contribute up to $7,750.

In 2024, employees will be able to contribute up to $4,150 to their HSA, while people with family coverage will be able to contribute up to $8,300.

Investing in retirement? Here are six lower-risk options to add to your portfolio.

4. Look for a Work-From-Home Job for Retirees

If you need extra money in your retirement, a work-from-home job can be a good opportunity to bring in some income.

Here’s an article about 15 online jobs for retirees.

As with anything you find online, some opportunities are better than others. And sadly, there are plenty of work-from-home scams out there, so keep an eye out for the red flags mentioned in that article.

You have the skills and experience. Now it’s time to be your own boss. Here’s how to start a business in retirement.

Why People Retire Earlier Than Expected

“We do know that a substantial share of older workers will need to retire sooner than they had planned,” said Dr. Christian Weller, chair of the Department of Public Policy and Public Affairs at the McCormack Graduate School at the University of Massachusetts.

“Generally, their own health and an inability to find a new job in a world full of age discrimination tend to be the two top reasons for this discrepancy. Other factors are caregiving needs for spouses, parents and other relatives.”

The bottom line is that there’s a substantial risk of having to leave the workforce sooner than people had planned, Weller said.

We know this isn’t welcome news, but it’s definitely something to think about. Everyone who’s working needs to be aware of this reality — and needs to plan ahead.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.