Why Many Americans Retire Earlier Than Planned

By Carolanne Chavanne, CFP®

The traditional retirement age in the United States is 65, the age at which most people are eligible to begin receiving full Social Security benefits. But many people feel the allure of leaving the workforce much sooner. Many Americans are deciding to retire earlier than planned, whether by choice or because of other circumstances. According to the 2023 Retirement Confidence Study, workers report retiring at a median age of 62 years.¹

Let’s examine why many Americans retire earlier than planned and explain some of the benefits (and considerations) of retiring early.

Why Do People Retire Early?

The decision to retire early is often made through a mix of personal choice and external factors. Let’s dive in to why some people may retire sooner than anticipated.

Health Reasons

A significant reason for people to opt for early retirement is that they experience health-related issues. If health conditions make it challenging to continue working, or a person desires more time to focus on their health, early retirement may be a viable option.

Job Loss or Job Dissatisfaction

Sometimes, the decision to retire early is a result of the job. Job loss, particularly later in life, can lead to early retirement, especially when finding new employment becomes challenging. Similarly, feelings of burnout, stress, or dissatisfaction with a job can make early retirement more appealing.

Family Care

Many people choose (or are forced) to retire early to care for loved ones. They may need to care for an aging parent, spouse, or family member with health issues. The desire to invest more time in family life can also be a strong pull toward early retirement.

Financial Security

For some, diligent saving and wise investments may provide the financial security to retire early. People who have saved enough to support themselves without needing to work may have the luxury of retiring on their own terms.

Pursuit of Passions

Lastly, many retire early to pursue passions, hobbies, or personal projects they couldn't focus on during their working years. This could range from traveling around the world to starting a business, returning to school, or simply enjoying a leisurely lifestyle.

The Benefits of Retiring Early

Retiring early brings with it a wealth of benefits. The most obvious is giving people more time to do the things they love. These extra years of freedom can lead to a rich, fulfilling life that might not be possible when a full-time job dominates their days.

In addition, retiring early can be good for people’s health. Retirement means less stress, more time for physical activity, and the ability to focus on a healthy diet. Numerous studies have shown that retirement can lead to improvements in both mental and physical health.²

Considerations of Retiring Early

As enticing as early retirement sounds, it is not without its drawbacks. One significant consideration is the financial aspect. When people retire before the full retirement age, they may not be able to receive full Social Security benefits.³ This means a potential reduction in monthly income, which can impact retirement income planning.

Health care is another crucial consideration. Most Americans become eligible for Medicare at age 65. People who retire before this age will need to consider how to cover their healthcare costs. This can be an additional burden on their retirement savings, if not appropriately planned.

Early retirement is a goal for many and can be possible with diligent saving and planning, but it also comes with a number of considerations. When a person can afford to retire will depend on their living expenses, potential income in retirement, and retirement savings.