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Retirement Planning > Spending in Retirement > Income Planning

Growing Number of Americans Want to Retire Before 65: Study

By Ginger Szala

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What You Need to Know

  • More Americans want to retire early or have already done so.
  • Many would-be early retirees could use some professional help to meet their savings goals.
  • Many pre-retirees plan to have several sources of income, making them more likely to seek financial advice.

A new study shows that a bigger share of consumers, 39%, plan to retire before age 65 than in any other year since 2010.

Eighteen percent say they plan to retire before age 59, according to the study by Hearts & Wallets, an 11-year-old research and benchmarking firm that specializes in how consumers save, invest and seek investment advice.

However, the realities of early retirement mean that advisors will have to work more closely with this age group to increase savings.

The yearly study, Retirement & Funding: Ideas for Enhancing Advice as Income Sources Evolve and Target Dates Move Younger, was released Tuesday.

The online study of almost 6,000 U.S. households also found that:

  • 38% of respondents under age 54 aspire to full-time retirement by age 55.
  • Only 32% of those age 55 to 64, or pre-retirees, do not anticipate stopping full-time work within five years.
  • 44% of “pre-retiree” aged respondents are already retired.

Although the pandemic disrupted many lives, one effect “is a renewed appreciation for building financial security and planning for possible end of work,” Laura Varas, CEO and founder of Hearts & Wallets, said in a statement.

The study highlights a dichotomy: While 34% of Americans want a set retirement age, up two percentage points from 2019, there is a larger group — 53%, up three percentage points from 2019 — of Americans who want to “work full time as long as health permits.”

The number of people who want to work part time as they age has dropped four percentage points, to 13%, from the previous year.

Need for Advice

The study did find that a segment of “aspire to retire by 55” households — roughly 18% — are “well positioned in some ways to achieve their early retirement goal.” For example, they have saved 15% of income and reduced student debt, and they spend less on housing. Retiring early, however, might still be an “unrealistic” goal.

Meanwhile, the study found that one-third of those who aspire to retire early have saved only up to 7% of yearly income for retirement.

Another finding is that almost half of future retirees expect to have more retirement income sources, such as real estate, than current retirees, who on average have 2.4 sources of income, according to the study. This bodes well for advisors as the more income sources, the more likely clients will need financial advice, Hearts & Wallets stated.

“[Advisors] should understand which sources matter most to individual consumers,” said Amber Katris, Hearts & Wallets subject matter expert, in a statement. “Consumers with a higher number of income sources are more receptive to paying for financial advice.”

Despite the pandemic, participation in employer-sponsored retirement savings plans was up in 2020, the study found.

Also, having more “reliable choices screened by my employer” was more motivating to Black participants than whites and Asians. A more generous company match increases overall household savings rates, especially at lower income levels.

Ginger Szala

@gingerszalaink

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