Are your employees and executives prepared for the possibility of unexpected retirement? Many different life events can leave a worker with no choice but early retirement.
According to a recent CNBC article, “This is the age when Americans say they plan to retire,” younger Americans (Gen Y) on average expect to be able to retire by age 59. In contrast, Baby Boomers on average, identify their target retirement age as 68. But as the past eighteen months have clearly underscored, sometimes even the best laid plans go awry. As employees and executives plan for retirement, they should concurrently plan for the possibility that unexpected retirement can, and does, affect millions of American workers.
Events that Can Change Your Retirement Expectations
Workers expect to have control of when they retire, but that’s not always how life plays out. Research compiled by the Employee Benefit Research Institute in the 2019 Retirement Confidence Survey showed that among workers who retired earlier than planned, the two top reasons were a decline in personal health and changes by their employer such as downsizing, company closing, or other type of job separation beyond the individual’s control.
Some early retirees did so because they realized they could, while others left their jobs early because they wanted a different career path for their “second chapter”. Other reasons, such as outdated skillsets or the need to take on a caregiver role for a family member forced a smaller percentage of workers into unplanned and unexpected retirement.
Although not reflected in the study, the global pandemic has further changed the work and retirement timelines of many individuals.
More Reasons to Review Your Retirement Strategy
The reality is, Americans are living longer. More years of life translate to an increased need for additional retirement savings in a world where the cost of living continues to rise. Along with market unpredictability, creeping inflation, and rising healthcare costs, American workers can’t ignore the elephant in the room. The Social Security Administration, by the Office’s own projections, states “… benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.[i]
The numbers of workers entering the workforce, even before the impact of COVID-19, cannot keep pace with the number of retirees exiting the workforce and filing for Social Security benefits. Exacerbating the problem further is that fact that the birth rate in the US continues to decline.
Companies that prepare employees with flexible solutions to accommodate both life’s predictable and unpredictable events are taking responsible steps that could significantly impact workers and the US economy in positive ways for generations to come. If your organization wants to be part of the solution (and not part of the problem), contact any member of the Fulcrum Team to learn more about flexible, creative, retirement savings solutions.
[i] These estimates reflect the intermediate assumptions of the Social Security Board of Trustees in their 2009 Annual Trustees Report. The Congressional Budget Office (CBO) has been making similar estimates for several years that tend to be somewhat more optimistic than the trustees’ estimates principally because CBO assumes faster growth in labor productivity and real earnings levels for the future.
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