Rosalind Evans
A recent study sheds light on the fact that many Americans choose to retire irrespective of whether they’ve reached their desired financial goal for retirement.
The report by Hearts & Wallets, a research firm, reveals that though 74% of investable assets are controlled by U.S. households aged 55 and above, the size of their assets isn’t a significant factor determining their retirement decisions.
Data from the U.S. Census Bureau and Federal Reserve and a survey of nearly 6,000 people conducted in late 2022 were analyzed for the report.
The study uncovered that 36% of households aged between 55 to 64 have already retired. Among this demographic, 27% plan to stop working full-time within the next five years, while 37% anticipate continuing with full-time work beyond that period.
Interestingly, 35% of people within this age bracket with less than $50,000 in investable assets consider themselves retired. Comparatively, 52% of those with a nest egg of $2 million to just below $5 million have retired.
Notably, some older workers remain in the workforce even with substantial savings. For instance, among participants with investable assets ranging from $2 million to just under $5 million, 82% aged between 65 to 74 and about 94% of those aged 75 and above have retired.
According to Laura Varas, CEO and founder of Hearts & Wallets, the report underlines that not all senior households are retired. Retirement is more about having financial stability, paying off debt, and adjusting lifestyle rather than hitting a specific asset target.
Two primary factors can cause people to postpone their retirement, as per Carolyn McClanahan, founder of Life Planning Partners and a CNBC Financial Advisor Council member. She identified one group as those who find meaning and fulfillment in their work, maintaining a balance that allows them to enjoy life still.
The other group comprises people uncertain if their savings are adequate for retirement, a concern widespread among those aged 55 and above. They are apprehensive about the possibility of being unable to work and their finances dwindling.
For such individuals, understanding their retirement requirements could alleviate this fear. McClanahan suggests analyzing one’s expenditure to distinguish between necessities and luxuries.
Conversely, the Employee Benefit Research Institute’s 2022 Retirement Confidence Survey reports that 47% of workers retire sooner than planned. Of these, 32% cited illness or disability as the reason, 23% retired due to changes at their company, and 38% retired early because they could afford to do so.
For those compelled to retire unexpectedly, it is essential to consult a financial planner to evaluate their cash flow sources. This includes devising a strategy for claiming Social Security benefits or withdrawing from retirement plans.
McClanahan further suggests that those caring for a loved one should explore any resources that might help to cushion their financial impact.
The decision to retire doesn’t solely revolve around the size of one’s financial portfolio, as commonly perceived. The study indicates that factors such as job satisfaction, fear of economic insecurity, unexpected life changes, and the ability to sustain a desired lifestyle play significant roles. As more Americans navigate their retirement choices, understanding these findings could provide much-needed perspective, empowering individuals to plan their retirement more holistically.
