Most people plan out their financial lives assuming a retirement around age 65, and maybe 70 in some professions. And given good health, that's a reasonable assumption.
But it's also often a bad one. According to a new survey from Prudential Life Insurance, 51% of retirees said they were forced into retirement years sooner than they had anticipated.
- 29% cited health problems.
- 14% cited layoffs or restructurings.
- 13% cited the need to provide care for a loved one.
- 10% cited the inability to find a new job at their age.
The financial impacts were significant. Nearly half of those who were forced out of the workforce early said that retiring early had a moderate to major negative financial impact on them.
Retirement is getting tougher. Meanwhile, the percentage of working-age households at risk of being unable to maintain their standard of living into retirement has skyrocketed, from 31% in 1986 to 50% in 2016. A strong stock market isn't enough to rescue anybody.
More families are heading into retirement in a precarious financial situation despite some of the strongest bull markets in stocks in history during that period. The decline of the traditional pension is one factor, but today's working Americans have some severe headwinds:
- Higher college costs.
- Lower interest rates and dividends.
- Higher housing costs.
- Higher medical costs.
- Longer life spans, - a happy circumstance, but one that will require future retirement nest eggs to last longer than they did 30 years ago.
- Uncertain Social Security benefits.
As a result, most people now in retirement say they've had to roll back spending to make ends meet - a function of inadequate savings and risk-taking, and in some cases, sheer bad luck for which their savings could not compensate.
What you can do.
Prudential asked successful retirees what advice they would give to future generations. Their responses:
Start saving while young - Prudential found that those who said they were "living the dream retirement" started saving in earnest for retirement years earlier than those who told researchers they were struggling. Successful retirees started retirement saving at an average age of 40, while unsuccessful retirees started saving at an average age of 47.
An early start is particularly vital for people who are forced into an early retirement - and there is no way to tell years in advance who those people are going to be. It could easily be you.
Save more - Unsurprisingly, the more people saved and invested for retirement, the more successful they were about reaching their financial objectives, including a secure retirement income.
Learn about investing -The people who are most successful in retirement also tended to be the most knowledgeable about investing.
Be willing to take risks - People who are having a successful retirement didn't get there on CDs and money markets alone. They took calculated risks, in judicious pursuit of better returns.
Get a financial advisor - Even though successful retirees are more educated about investing in general than less successful retirees, they still seek the services of qualified financial professionals.
A substantial majority of retirees who say they are "living the dream" say they used financial advisors to help them make decisions, project their retirement income needs and help them determine the savings they would need to generate that retirement income.
Additionally it's wise to take measures to protect a lifetime of income, including taking out prudent levels of disability insurance, life insurance and coverage to provide for long-term care needs or nursing home care needs.