Americans Expect to Retire About 5 Years Later Than Today’s Retirees — and Here’s the Reason

Working Americans are now planning for retirement much later than people who are already retired. A recent TIAA report found that current retirees left the workforce at an average age of 57, while those who have not yet retired expect to do so at 62 — and many believe they may need to keep working even longer.

Here’s a look at the forces pushing Americans to stay in the workforce longer.

Why Many Workers Expect a Later Retirement

Beyond setting a later target age, 52% of workers said they are likely to postpone retirement, compared with only 6% of retirees who ended up retiring later than planned.

“American workers face a fundamentally different retirement landscape than their grandparents did,” said Tim Pitney, head of lifetime income distribution at TIAA. “The disappearance of pensions, uncertainty around Social Security, rising healthcare costs and longer life expectancies mean that reaching a retirement ‘finish line’ requires accumulating more personal wealth than prior generations needed.”

Many current retirees had more certainty thanks to defined benefit plans, which spelled out exactly what they would receive and when.

“Without that structure, workers are essentially estimating a moving target, which naturally generates lower confidence in savings amounts and retirement timelines,” Pitney said.

How Career Breaks Can Push Retirement Further Out

The report found that more than half of workers, 51%, have been out of the labor force for more than a year, with caregiving for children cited most often, at 17%. Those interruptions can make it harder to retire on schedule.

“Career gaps directly erode two of the most critical retirement-building mechanisms: contributions and compounding,” Pitney said. “Every year out of the workforce is a year without employer matches, 401(k) contributions and the tax-advantaged growth that comes with them.”

For the 51% of U.S. adults who have spent more than a year away from the job market, those breaks can lead to smaller retirement balances and a greater need to work longer to make up the difference.

Higher Costs and Longer Lives Are Also Delaying Retirement

A range of pressures, including caregiving responsibilities, a higher cost of living and student loan debt, have slowed wealth-building for younger retirement savers in particular, Pitney said.

“Longer life expectancies also mean people need to fund more years of retirement, which naturally encourages working longer, as many feel the need to ‘make up’ for the possibility of living to 90 or 100,” Pitney added.