Most people expect to retire in their early 60s. Is this realistic?

There’s been a big shift in the way people think about their later years: New data from the Federal Reserve Bank of New York shows that most Americans don’t expect to work beyond their early 60s.

The number of workers who plan to work full-time beyond age 62 has fallen to 46%, from 55% four years ago. Only 31% of workers expect to work beyond age 67, down from 36% in 2020. The decline spans age, education and income groups, but more female workers than male workers are seeing the door sooner rather than later.

It raises the question: Are these expectations reasonable?

Excuse the eye roll. The short answer is that for many people, turning off their paycheck at age 62 and leaving behind health care and other benefits that come with full-time employment is a terrible idea.

For starters, many Americans have woefully failed to save for retirement. And the huge cost of having to pay medical bills for the three-year gap before they’re eligible to enroll in Medicare is probably something they haven’t factored into their calculator.

Then, add in future rising medical expenses not covered by Medicare. A single 65-year-old may need about $157,500 saved (after taxes) to cover health care expenses in retirement. The average retired couple may need about $315,000 saved, according to Fidelity.

Calculating the cost of living three decades after retirement at age 62 makes my head spin. If you think Social Security benefits will help you, think again. Social Security offers less than most people think.

How much you need in retirement varies greatly from person to person, but the bottom line is that the more years you earn a salary, the greater your chances of outliving your money.

Read more: How much money should I have saved by 50?

After the exit strategy from the age of 62

The factors driving the decline in the age Americans expect to retire are unclear, the researchers wrote, but they pointed to an increase in people preferring to work part-time vs. full-time, a post-pandemic rethinking of the intrinsic value of work and what really matters to them and how they want to spend their time in a life where things can change in an instant, and an increase in family net worth due to the pension account earnings.

The dream of retiring at age 62 fails to account for the advantages of working longer. The longer you can continue to earn in some way, the better for your future financial security, even if it’s just a safety net. And the mental pay for work, while hard to put a value on, can be an essential ingredient to feeling happier and more engaged as we age. It can provide purpose and a sense of worth.

Perhaps that’s why older Americans now work more hours, on average, than in previous decades. Today, 62% of workers 65 or older work full-time, compared with 47% in 1987, according to the Pew Research Center. And they are more likely to have a four-year college degree than in the past.

Retirement, or returning to work, often part-time after leaving the workforce, is gaining traction across the country, especially as many people were forced to retire earlier than they had hoped during the pandemic.

Employee expectations vs. the reality of retirees

While the New York Federal research is somewhat surprising, it matches the reality for many Americans. Due to health problems, layoffs, or caring for elderly relatives, most retirees, 7 in 10, report retiring earlier than age 65.

So, whether by necessity or choice, retiring early can cause problems when it comes to meeting the costs of living in retirement. Fewer than half of retired Americans believe they have saved enough, according to a new survey by investment manager Schroders.

About a quarter are unsure and about a third are convinced they don’t have enough savings. Meanwhile, 1 in 3 retirees are concerned that financial stress will affect their overall health.

Many baby boomers headed into retirement not knowing if their savings would be enough, which is creating unnecessary financial stress, said Deb Boyden, head of US Defined Contribution at Schroders. This predicament provides a cautionary tale for generations to come after retirement income and underscores the need for better retirement income planning and solutions.

It’s not pretty. Nearly half of all retirees report that their retirement expenses are higher than they expected and about half believed that Medicare would cover more of their health care costs, according to Schroders research.

Read more: Retirement Planning: A Step-by-Step Guide

Inflation is certainly a major concern. Prices in the U.S. have risen sharply in recent years, and that’s especially challenging for retirees living on fixed incomes, Boyden said. And most retired Americans admit they have no idea how long their savings will last.

Never retire and live forever?

Roughly a quarter of adults age 50 and older say they expect to never retire, according to an AARP survey, and about 1 in 4 have no retirement savings, according to a New York Fed study.

Another report reinforces this sense of non-retirement. More than a quarter of all non-retirement investors are unsure if they will ever retire, and an additional 19% expect to retire later than planned due to inflation, according to new research from National Pension Institute.

High prices combined with the fact that many people don’t have enough savings for retirement are making it increasingly difficult for people to choose when to retire, said David John, AARP’s senior policy adviser. for Yahoo Finance.

One reason people aspire to stop full-time work earlier than the traditional retirement age of 65 is that they are not sure how long they are likely to live.

Only about a third of Americans know the average life expectancy of retirees, and only 12% knew the correct answers to a basic life expectancy literacy quiz.

These were: Men can live to be 84 and women, 87. Odds among 65-year-olds of living at least to age 90: 3 in 10 men and 4 in 10 women. Finally, the odds among 65-year-olds of not living past age 70: 5% of men and less than 5% of women.

Brass tracks: Retiring at age 62 sounds nice, but having enough funds to live comfortably in what could be three decades after you leave the workforce can be daunting.

Retirement plans and the impact of Social Security

The big X factor in all of this: Social Security.

To the extent that these expectations signal actual future retirement behavior, they also have implications for future decisions by consumers about the timing of claiming Social Security benefits and receiving those benefits, the New York Fed economists write. Russian.

In other words, people may be more inclined to claim their Social Security benefits at age 62, the earliest possible age, rather than delaying until full retirement age, which ranges from 66 to 67 or even better, wait until age 70 to earn delayed retirement. loan, which significantly increases the monthly check for decades.

It also means more retirees could draw from the retirement trust fund and not pay into it, which could shake the program’s economic underpinnings.

One major concern: The Social Security and Medicare Trustees 2024 reports projected that the pension trust fund would dry up in 2033, unchanged from last year. If the trust fund is depleted, then payroll taxes will continue to fund 79% of scheduled benefits, slightly better than the 77% projected last year.

This has ramifications for millions of workers who plan to rely on Social Security for a large portion of their retirement income. About half of the population age 65 and older live in households that receive at least half of their family income from Social Security, and about a quarter rely on Social Security for at least 90% of their family income.

As Maya MacGuineas, president of the Committee for a Responsible Federal Budget, previously summarized for Yahoo Finance: We were less than a decade away from a massive solvency crisis that would cut benefits for over 67 million seniors and severely limit access their in health care soon after. .

While there are certainly people who have saved enough for a long retirement, congratulations all around if you’re one of them, the reality is that an all-or-nothing work ethic is a thing of the past, no matter how tempting it is to you climb aboard. the Dream Weaver train.

Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “Never too old to get rich.” Follow him to X @kerryhannon.

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