A few million Americans retired earlier than expected during the pandemic, which became known as the Great Resignation. That broke a long-term trend in which the average retirement age gradually increased.
But it looks like the long-term trend is back in place. Many of the pandemic retirees have returned to work or are thinking about returning. And other data supports the trend toward later retirement.
Each year Gallup surveys Americans on a series of personal financial issues, including when they plan to retire or, if retired, when they retired.
In 1991, the average retirement age was 57, and in 2022 it is 61. In addition, the age at which people expected to retire was 60 in 1995, and in the latest survey was 66. It peaked at 67 in 2012 in the wake of the financial crisis but has held steady between 65 and 66 since, except for a drop to 64 in 2021.
Analyzing 21 years of data, Gallup found there’s been a significant, steady increase in the age at which people retired. When people 55 and older are divided into five-year age groups, the data showed the percentage of retired people in each age group declined by five to nine percentage points over time.
The most significant decline was in those 60-64. In 2002-2007, 41% of that group was retired. In 2016-2002, only 32% of the group was retired.
Social Security is a likely reason for the delay in retiring. New retirees must wait past age 66 to claim the full retirement benefit. Another and related possible explanation is that more and more people understand why it makes sense to delay Social Security benefits until full retirement age or later.
Other surveys of pre-retirees find that fewer people believe they have the financial resources to retire comfortably at the earlier ages. They’re working longer to increase their financial security.
Over the years the Gallup survey found a meaningful gap between the ages at which people retire and the ages at which they initially thought they would retire. Many people retire years earlier than they expected when they were younger.
In 2002, on average people retired at 59 when they initially thought they would retire at 63. The gap between expectations and reality has been consistently large over the years. Its peak was seven years in 2012. On average people thought they would retire at 67 but actually retired at 60.
Sometimes people retire early because they achieved financial independence faster than expected. But many times earlier retirement isn’t voluntary. Sometimes a personal or family health issue cause one to stop working. Other times, a person loses a job and can’t find a desirable replacement, so they retire.
Whatever the reasons, it’s important for both pre-retirees and retirees to remember that a retirement plan shouldn’t be considered locked in once it is developed. The plan needs to have flexibility. Circumstances will be different from expectations and assumptions. The plan needs to be reviewed regularly and adapted to those changing circumstances.