SmartMoney Blogs

A blog about living in and planning for retirement

3 Reasons We Can’t Retire Early Anymore


You get it: The economy is stagnating, and nest eggs are shrinking, so boomers are delaying retirement. But there are other, less-talked-about reasons why many Americans can’t retire early.

Until recently, the trend was in the other direction.  The average age that an American man retired in 1910 was 73; by 1940, it was 70; and by the mid-1980s, it was 63 — a decline of 10 years over a 75-year period.  But “this century-old trend toward earlier and earlier retirement is over,” write the authors of the 2011 study “Early Retirement: The Dawn of a New Era.” “American men and women are now leaving the labor force later than their predecessors did.”

Here are three, lesser known reasons some people now delay retirement:

Declining Retiree Health Insurance: The percentage of private-sector workers covered by employer-sponsored health insurance after retirement dropped from 31% to 21% from 1997 to 2004, according to the study.  That’s problematic for retirees considering that health insurance premiums are on the rise and even those with Medicare will need to pay out-of-pocket costs in the hundreds of thousands of dollars.

Less Generous Social Security Payments: The age at which someone is eligible for full retirement benefits has risen from 62 to 65 and to 67 (for those people who hit 62 in 2022 and beyond), which means that you’ll have to wait longer to get more money.  Plus, the percentage of an individuals’ previous income that Social Security replaces is declining, as Alicia Munnell discusses here.

The Death of the Pension Plan:  The number of private-sector workers participating in traditional pension plans – where the employer, rather than the worker herself, is primarily responsible for contributing money — has fallen more than 27% in just seven years to 16.2 million in 2005, according to EBRI.  In contrast, the number of defined contribution plans such as 401(k)s — in which the worker is primarily responsible for contributing the money — has risen dramatically: In 1988, only a quarter of those with an employer pension had a defined contribution plan; by 2006, two-thirds did.  In effect: much more of the retirement savings burden now falls on the workers, which often means workers are forced to delay retirement due to lack of savings.

Use the SmartMoney Retirement Planner to see when you can retire.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 8)

View all Comments »
    • what is going to happen to abused taxpayers like me when i turn 67 and the government tells me that social security ran out of money, and my 401k is too little because i make barely above minimum wage?

    • I would request that everyone over 65 ask your congreeman/woman to introduce a bill in Congress to have your deductions from your IRA taken out tax free for 3-5 years up to 35K for 3-5 years. Our portfolios are down anywhere from 15-30% and would take more years than we have to get back what we lost. Having that extra cash we could get it back into the economy or help defray incresing health care costs. Please have your children contact their lawmakers, also. The more people going to bat for the seniors the more they will listen.
      I read recently that the US Government can’t account fo $30 or more billion dollars spent in Iraq and Afganistan. There are other handouts that benefit no one because there is no accountabilty for the money spent. Don’t you think that you deserve a break. This time the money won’t go down a “black hole”.
      I bessech anyone who reads this and is a senior or the child of one notify Congessmen and women to introduce that bill!!!!!!!!!

    • Gaston, I see your still working the diversion from the issue at hand … the grossly excessive, unnecessary, and unjust pensions promised Civil Servants.

      What a pathetic comparison … HP, a PRIVATE company vs Public Sector pension & benefits.

      The taxpayers HAVE a choice to buy or not buy HP’s products, and the HP’s shareholders (NOT Taxpayers) suffer when HP or any other Private Sector company screws up.

      We taxpayers are a VERY abused audience …. captive to the collusion between your Unions and our politicians trading favorable votes on pay, pensions, and benefits for campaign contributions and election support. But don’t get too comfortable with this continued abuse … as we’re fed up and working on changing tings … including big-time reductions to your pensions and retiree healthcare.

      Oh, and we no longer easily fooled. No, it’s not just the blatant abuses, it’s the richness of the basic formula and plan provisions that are screwing the taxpayers. All easily and ACCURATELY summarized as follows:

      The Taxpayers’ contributions (including the investment earnings thereon) ROUTINELY pay for 80-90% of Public Sector pensions, the taxpayer (NOT employee) paid-for share of which is ROUTINELY 2, 4, even 6 times (for safety workers) greater in value at retirement than what a Private Sector worker retiring at the SAME age, working the SAME number of years, and making the SAME pay typically get as a pension from his employer.

      With CASH PAY now just about equal in the Public and Private Sectors (per the US Gov’t BLS), there is zero need to provide ANY better pension than what Private Sector workers typically get…. and the workers (not taxpayers) should pay for at least HALF (not 10-20%) of it.

    • In writing about Public Sector benefits a distinction should be made between benefits paid to military retirees and their families, Federal Government retirees, and State and local retirees. Setting aside Tough Loves bombastic rhetoric “…1000 times as much financial damage as all CEO’s combined…” versus the fact that Leo Apotheker erased about $ 40 B in value from HP. Even the most pessimistic of projections of total Public Sector debt do not come close to $ 400 T, and this is one CEO not the collective incompetence. The $ 40B figure does not include the loss of US jobs nor the losses to tax revenue.

      “The fault dear Brutus lies not in the stars but in ourselves”

      There are clear abuses of defined benefit programs especially in the State and Local programs to include: pension spiking, fund management kick-backs, double dipping, and impossibly optimistic future earnings estimates. Of course there is abuse in a lot of other places as well, such as false social security disability retirements as an early retirement package.

      I am sure that everyone who has seen a loss in their Defined Contribution (i.e. 401(k) program) as a result of investments in HP feels an immediate pain to their retirement plans. With 57% of HP stock held by institutional investors, many people will see this hit on their next quarterly statement. The real issue is that taxpayers are not engaged with their money. Too many people do not drill into the investments held in their retirement plans and too many do not show up at local government budget sessions where local legislators vote themselves big pay raises. It is always easy to blame “Them” when unengaged.

      The three reasons cited in the SmartMoney article are true: health care costs are out of control, Social Security is underfunded, and 401(k) programs are replacing well funded Defined Benefit programs. In the debate over SSA reform, Congress is avoiding the more urgent failure of Medicare. Corporate greed is now gutting 401(k) plans directly and indirectly now that private pensions are gone.

      We put money in 401(k) mutual funds who sit on the Board of HP and hire incompetents to waste our money, while granting huge Golden Parachutes ($13 M) for their mistakes. The Game is rigged, but don’t blame “Them”. Blame yourself for letting it happen and still playing instead of getting up and walking away from the table.

    • No Gaston, I don’t have it wrong at all. You (likely a Civil Servant benefiting from this largess) are trying the standard diversion from the thievery of your ilk … trying to divert attention by blaming something else. Sure, the Corporate CEO’s are bad boys, but collectively the huge number of Civil Servants ALL with extremely generous and excessive pension formulas are doing 1000 times as much financial damage as all CEO’s combined.

      Sorry buddy, but taxpayers REALLY need to focus on ending these excessive DB Plan for CURRENT (yes CURRENT) Civil Servants.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.