Health Issues Driving Americans to Retire Earlier Than Planned, Study Finds

A new TIAA Institute study finds that unexpected health problems are the primary reason Americans retire earlier than planned. The study reveals that health issues, such as cancer and lung disease, significantly reduce the likelihood of working past ages 62 and 65.

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Bijay Laxmi
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Health Issues Driving Americans to Retire Earlier Than Planned, Study Finds

Health Issues Driving Americans to Retire Earlier Than Planned, Study Finds

A new study by the TIAA Institute reveals that unexpected health problems are the primary reason Americans are retiring earlier than they had planned. The study found that those who experience a decline in health are 8.9% less likely to work past age 62 and 14.1% less likely to work past 65.

Why this matters: The trend of early retirement due to health issues has significant implications for the economy and social security systems, as it can lead to a loss of skilled workers and increased pressure on retirement funds. Moreover, it highlights the need for individuals and policymakers to prioritize healthcare and retirement planning to ensure a stable financial future for an aging population.

The TIAA Institute surveyed U.S. adults about their expected retirement age and the impact of various life events. The study examined how health shocks, economic shocks, and family shocks affected people's plans for when to leave the workforce. Health issues emerged as the dominant factor driving earlier-than-expected retirements.

Specific illnesses were found to have a significant impact on retirement timing. A cancer diagnosis reduces the chances of working past 62 by 16.4%, while lung disease decreases the likelihood by 26.4%. Arthritis also plays a notable role, lowering the chances of working past 62 by 10.2%.

"We found clear evidence that some of the health shocks seemed to really matter for people's expectations, that is, they adjusted them towards retiring earlier," said Jonathan Leganza, co-author of the study and economics professor at Clemson University. The findings align with data from the Federal Reserve showing that in 2022, less than half of retirees said they left work because they reached normal retirement age, while 30% retired due to health problems.

Financial advisors agree that health issues are a leading cause of early retirement. "The main reason people decide to retire early always revolves around a health issue," said William Schretter, a CFP at Allworth Financial. Unexpected health situations can also lead pre-retirees to leave the workforce to care for aging parents or re-evaluate their own priorities.

The TIAA study underscores the importance of factoring in health history when planning for retirement. Wealth management advisors should consider the potential impact of health shocks on a client's retirement readiness and adjust savings strategies accordingly. As Leganza noted, "What our research is showing is that some of these events affect how long you'll be retired. And so it's kind of a first step to thinking about how to adjust savings."

With Americans increasingly leaving the workforce sooner than anticipated due to health problems, the study sheds light on a critical factor shaping retirement trends. As individuals and financial professionals navigate this landscape, a proactive approach to planning for the possibility of early retirement brought on by health issues will be essential to ensuring financial security in one's later years.

Key Takeaways

  • Health problems are the primary reason Americans retire earlier than planned.
  • Health issues reduce the likelihood of working past 62 by 8.9% and past 65 by 14.1%.
  • Cancer, lung disease, and arthritis are specific illnesses that significantly impact retirement timing.
  • Financial advisors agree that health issues are a leading cause of early retirement.
  • Factoring in health history is crucial when planning for retirement to ensure financial security.