The Average American Retires at Age 61. There's a Big Problem With That.

Choosing what age to retire is a highly personal decision. Some people are eager to retire as early as possible, while others prefer to continue working late into life.

Regardless of when you retire, it's a decision to take seriously. Retiring before you're ready can wreak havoc on your finances, making it much more challenging to enjoy your senior years comfortably. Research shows that the average American retires at age 61, but there may be a big hidden risk.

The average retirement age is changing

As of 2022, the average retirement age among U.S. workers is age 61, according to a poll from Gallup. That's up from age 59 in 2002 and age 57 in 1991.

This is in line with other research suggesting that workers are choosing to retire later in life. A 2023 report from the Transamerica Center for Retirement Studies, for example, found that nearly half of baby boomers plan to work past age 70 or never retire at all.

Person with a serious expression looking out a window.
Person with a serious expression looking out a window.

Image source: Getty Images.

However, the Gallup poll also found that among nonretired adults, the average worker expects to retire at age 66, as of 2022. In other words, the average worker ends up retiring a whopping five years earlier than expected.

While early retirement isn't always a bad thing, it can spell trouble if you're not prepared. The Transamerica report revealed that 83% of boomers who plan to continue working are doing so for financial reasons, suggesting that their savings are falling short. Furthermore, only around one-third of workers say they have a backup plan in case they have to retire earlier than expected.

Retiring even one or two years earlier than planned can drain your savings by tens of thousands of dollars. Because age 62 is the soonest you can begin taking Social Security retirement benefits, retiring earlier than that may also force you to take even more money from your savings.

What you can do to protect your retirement

There may not be much you can do to prevent early retirement due to job loss or health issues. However, you can take steps to ensure these unforeseen life events don't derail your retirement.

Perhaps the best way to prepare is to increase your savings as much as possible, assuming that you'll retire earlier than you plan. If you still have many years left before retirement, saving even a little more now could add up substantially.

For example, if you contribute an extra $100 per month to your retirement account, that could add up to more than $17,000 within 10 years, assuming you're earning a modest 8% average annual rate of return. While that's not enough to retire on by itself, it can help your savings last longer if you retire early.

It can also be wise to take steps to help you avoid early retirement in the first place. Making a few lifestyle changes could help prevent future health problems, for example, and seeking out sources of passive income or side jobs can provide another income source if you lose your job.

There's no foolproof way to ensure you'll retire exactly when planned, and you won't always be able to prepare for an early retirement ahead of time. But when you're aware of the possibility and taking as many steps as you can to protect your retirement now, you can ensure you're as prepared as possible.

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