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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.


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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.