For far too many Americans, their retirement plan is to not retire -- or at least to retire late in life. While some people hope to keep working because they enjoy their jobs or want to stay active, many others think they'll need income from work because their retirement accounts are too low.
But while many pre-retirees want to work past traditional retirement age, only a very small percentage of current retirees actually have income from jobs. There are lots of reasons it may be difficult to continue working into your 60s or 70s, so if you're planning on a regular paycheck at this age, you may face serious financial trouble.
How many retirees actually work?
According to the Employee Benefit Research Institute, about eight in 10 pre-retirees expect they'll work for pay in retirement. But among current retirees, only around 28% are actually earning money from work. This is a problem, as 74% of current workers indicate they expect income from a paycheck to be at least a minor source of retirement funds.
Current workers are not just underestimating the likelihood they'll be able to keep earning in retirement. They're also assuming they'll stay full time in the workforce longer than they're likely to. The median age at which current workers anticipate retiring is 65, but the median age among those who've actually retired is just 62.
Plans for working late in life are likely to be derailed
This data is troubling because it shows far too many workers are counting on money they're unlikely to have in retirement.
If you're expecting to work full time for three additional years, that's three years of saving for retirement that you'll miss out on. So your money will have to support you for three more years. And if you have to claim Social Security benefits right away (as many workers will), you'll receive reduced monthly checks.
Those who are pushed out of the workforce early will have a major retirement shortfall already. And if you're among the three-quarters of workers planning on a job to help fund your retirement, you'll face an even bigger gap if you're not able to find or keep one.
Far too many seniors find their plans to continue working longer are derailed by health issues, a lack of employment opportunities, or the need to serve as a caregiver to aging parents or spouses.
What should you do?
If you're still young, it's important you don't plan on income from work to help support you. Set retirement savings goals as if you'll have to retire at 62 and anticipate that Social Security and savings alone must support you without additional money from a job. If you end up being able to work longer, you'll just have extra money to enjoy.
If you're nearing retirement or were forced into it before you were ready and you have too little savings without that anticipated paycheck, you'll need to react quickly to preserve the savings you have. This could mean a big lifestyle change like moving to an area with a lower cost of living or lower tax burden.
Don't anticipate working during retirement
With such a large gap between the workers who plan to work and the retirees who actually do, it's important to come to terms with the reality that wage income is not likely to be a source of retirement funds. The sooner you plan accordingly, the more likely you'll be able to prepare and have enough during retirement even if life doesn't go as planned.