Think You'll Work Past 65? You're Probably Wrong

A growing number of Americans are planning to postpone retirement and work a bit longer. But what they may not realize is that retirement isn't always a matter of choice.

Maurie Backman
Maurie Backman
Jun 18, 2017 at 7:09AM
Investment Planning

The average U.S. worker retires at 63, but these days, a growing number of Americans are holding off on retirement and working into their late 60s or even their 70s. In fact, in a recent survey by human resources consulting firm Willis Towers Watson, nearly 25% of workers say they aren't planning to retire until 70 or later. Meanwhile, over 50% of employees say they expect to keep plugging away past the age of 65, according to the Employee Benefit Research Institute.

There are numerous benefits to extending your career and working longer. First, for every extra year you remain employed, you'll not only get an opportunity to add to your nest egg, but you'll avoid dipping into your retirement savings. Secondly, by working until 66 or 67 and holding off on Social Security during that time, you'll avoid the reduction in benefits that comes with filing before your full retirement age. Better yet, if you work even longer and delay Social Security past your full retirement age, you'll get an 8% boost in benefits for every year you wait.

Senior male working at his desk


But even if you have every intention of working well into your late 60s or even your 70s, you may come to find that it just isn't an option. A recent Transamerica study reveals that almost 67% of retirees wound up leaving the workforce sooner than anticipated, due in part to layoffs and company reorganizations. In fact, of those who retired earlier than expected, only 16% did so because they realized they could manage it financially.

This data is consistent with a report from Voya Financial that found that 60% of Americans wind up retiring earlier than planned. Voya's data points to health issues and job loss as contributing factors to this phenomenon, but no matter the cause, the takeaway is the same: If you're planning to work until your late 60s or 70s, you'd be wise to come up with a backup plan. Otherwise, you could end up putting your retirement at risk.

Keep your skills current

If you're hoping to work longer than the typical retiree, you'd be wise to boost or maintain your job skills. This way, your employer is more likely to view you as an integral member of the team and skip over your name if downsizing becomes necessary. You might consider taking a course or a continuing-education seminar to ensure that your skills and knowledge are up to date. You might also think about learning some peripheral skills that make you a more well-rounded employee on a whole.

Not only will this give you a better chance at keeping your current job, but it'll also put you in a better position to venture out on your own if you're let go before you're ready to retire. And if you're not eager to join the ranks of the self-employed, you'll have a better shot of beating out other candidates for jobs.

Ramp up your savings as soon as you can

While you can't count on working as long as you'd like, you can protect yourself financially by contributing as much as possible to your retirement plan. If you take steps to increase your 401(k) or IRA contributions so that you're maxing them out by the time you reach your 60s, you'll be much better positioned to pay the bills in the event you're forced to retire earlier than planned.

Unfortunately, more than 40% of baby boomers nearing retirement have yet to begin saving, while the average worker that age who has saved doesn't have nearly enough. If you start maxing out your 401(k) at age 55 by contributing $24,000 a year, then by age 65, you'll have an additional $288,000 in savings to work with, even if your investments only bring in a conservative 4% average annual return during that time. And that could be enough to absorb the shock of an unexpected early retirement.

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Have a game plan for cutting expenses

Losing a job without warning can throw you for a loop at any age, but you'll be better equipped to cope if you already have a strategy for lowering your living expenses and getting by on less. That's why it pays to periodically review your budget and identify cost-cutting measures you can implement in an instant. This might mean forgoing theater subscriptions, unloading a vehicle, or cutting back on meals outside the home. No matter what adjustments you might need to make, having a list on hand can help you react immediately and preserve your savings if you're suddenly forced to retire early.

In an ideal world, you'd be able to work as long as you like and amass all the savings you need to live in comfort for the rest of your days. But since the best-laid plans often go awry, your next best bet is to prepare for the possibility that your career might get cut short. And the sooner you do, the easier it'll be to recover emotionally and financially.