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

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There’s been a big shift in how 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%, down from 55% four years ago. Only 31% of workers expect to work beyond 67, down from 36% in 2020. The declines span age, education, and income groups, but more female workers than male workers are eyeing the door sooner rather than later.

It raises the question: Are these reasonable expectations?

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

For starters, droves of Americans have woefully under-saved for retirement. And the sheer cost of having to foot medical bills for the three-year gap before they’re eligible to enroll in Medicare is surely something they haven’t put into their calculator.

Then, add up soaring future medical expenses not covered by Medicare. A single 65-year-old may need roughly $157,500 saved (after tax) to cover healthcare expenses in retirement. An average retired couple may need approximately $315,000 saved, according to Fidelity.

Tallying the cost of living three decades after retiring at 62 makes my head spin. If you think Social Security benefits will see you through, think again. Social Security provides less than most people think.

How much you need for retirement varies widely from person to person, but the gist is that the more years you earn a paycheck, the better your chances of not outliving your money.

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

The factors driving the declines 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 rethinking after the pandemic about the inner 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 a jump in household net wealth due to retirement account gains.

The retirement-at-62 dream fails to account for the upsides of working longer. The longer you can keep earning in some fashion, the better for your future financial security, even if it’s just a safety net. And the mental payout for work, while hard to pin a value to, can be a core ingredient to feeling happier and engaged as we age. It can provide purpose and a sense of feeling valued.

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

Unretiring, or going back to work, often part time after exiting the workforce, is gaining traction across the country, especially after many people were forced to retire earlier than they had hoped to during the pandemic.

Slocan Lake, BCSlocan Lake, BC

The number of workers who plan to work full time beyond age 62 has gone into a free fall, dropping to 46% in March, down from 55% four years ago, according to research by the Federal Reserve Bank of New York. (Getty Creative) (Ira T. Nicolai via .)

While the New York Fed’s research is somewhat surprising, it aligns with the reality for many Americans. Due to health issues, a layoff, or caring for aging relatives, most retirees — 7 in 10 — report retiring earlier than age 65.

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

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

“Many baby boomers headed into retirement with no idea if their savings would be enough, which is creating undue financial stress,” said Deb Boyden, head of US Defined Contribution at Schroders. “This plight provides a cautionary tale for generations that will follow boomers into retirement and underscores the need for better planning and retirement income solutions.”

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

Read more: Retirement planning: A step-by-step guide

Inflation is certainly a top concern. “Prices in the US have increased noticeably in recent years, and that is particularly challenging for retirees living on fixed income sources,” Boyden said. And most retired Americans admit they have no idea how long their savings will last.

Senior woman standing among the produce aisle at the supermarket and feeling worried about the increase in groceries pricesSenior woman standing among the produce aisle at the supermarket and feeling worried about the increase in groceries prices

Nearly half of all retirees report their expenses in retirement are higher than they expected, according to a survey from investment manager Schroders. (Getty Creative) (LordHenriVoton via .)

In an about-face from the New York Fed’s research, roughly one-quarter of adults aged 50 and older say they expect to never retire, per an AARP survey, and about 1 in 4 have no retirement savings.

Another report bolsters this “never retire” sentiment. More than a quarter of all non-retired investors are unsure if they will ever retire, and an additional 19% expect to retire later than planned because of inflation, according to new research from the Nationwide Retirement Institute.

“High prices combined with the fact that far too many people don’t have enough retirement savings is making it increasingly hard for people to choose when to retire,” David John, AARP’s senior policy adviser, said in an interview.

One reason people aspire to stop full-time work earlier than the traditional retirement age of 65 is that they are unsure how long they are likely to live.

Only about a third of Americans know the average lifespan of retirees, and only 12% knew the right responses to a basic quiz on longevity literacy.

These were: Men will likely live to 84 and women, 87. The likelihood among 65-year-olds of living to at least age 90: 3 in 10 men and 4 in 10 women. Finally, the likelihood among 65-year-olds of not living beyond age 70: 5% of men and less than 5% of women.

The brass tacks: Retiring at 62 sounds lovely, but having enough funds to live comfortably in what could be three decades after you step out of the workforce can be formidable.

A key concern: The 2024 Social Security and Medicare Trustees Reports projected that the retirement trust fund would run dry in 2033. (Getty Creative)A key concern: The 2024 Social Security and Medicare Trustees Reports projected that the retirement trust fund would run dry in 2033. (Getty Creative)

A key concern: The 2024 Social Security and Medicare Trustees Reports projected that the retirement trust fund would run dry in 2033. (Getty Creative) (Douglas Sacha via .)

The big X factor in all 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 claims for Social Security benefits and the receipt of those benefits,” the New York Fed’s economists wrote.

In other words, people might be more apt 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 credits, which increases the monthly check considerably for decades.

It also means more retirees may be drawing from the retirement trust fund and not paying into it, which could rattle the economic underpinnings of the program.

A key concern: The 2024 Social Security and Medicare Trustees Reports projected that the retirement trust fund would run dry in 2033, unchanged from last year. If the trust fund is depleted, then payroll taxes would continue to fund 79% of scheduled benefits — a tad better than the 77% projected last year.

That has consequences for the millions of workers who plan to rely on Social Security for a major portion of their retirement income. About half of the population aged 65 or 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, summarized previously for Yahoo Finance: “We’re less than a decade away from a massive solvency crisis that would slash benefits for over 67 million seniors and severely limit their access to healthcare soon after.”

While there certainly are folks who have saved adequately for a long retirement — a hearty congrats all around if you’re one of them — the reality is that an all-or-nothing work ethos is a thing of the past no matter how tempting it is to 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 her on X @kerryhannon.

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