Retirement survey finds more than half retired earlier than planned

More than half of current retirees aged 62 to 75 surveyed say they have retired from their jobs earlier than planned, according to EBRI’s 2022 Spending in Retirement Survey. Most cited health reasons or ability to retire early.

At a recent EBRI webinar, senior retirement leaders shared critical information about some of the reasons retirees retired from the workforce, and how they are faring now that they are retired.

One of the panelists, Bridget Bearden, research and development strategist with EBRI, based the information she presented on EBRI’s 2022 Spending in Retirement Survey. Nearly 2,000 American retirees between the ages of 62 and 75 were surveyed to assess how their spending patterns and retirement wellbeing have changed since 2020.

Bearden said most of the current retirees aged 62 to 75 who said they retired from their jobs earlier than expected cited the ability to retire and health issues as reasons for making their decisions.

There was some variation by race, financial knowledge, and access to advice/planning, Bearden said.  Earlier-than-expected retirement was more likely seen among respondents with a low level of financial knowledge, and with Blacks and Hispanics.

However, not all retirees stayed out of the workforce once they retired. In fact, one out of three respondents currently have experience in working after being retired from their primary career.

Some of the reasons they gave for returning to the workforce included:

• Work provides additional income for discretionary and unexpected expenses;
• It provides access to insurance benefits;
• It provides an opportunity to delay claiming social Security benefits.

Sources of information

Respondents had various sources of information before they made the transition to retirement. Overall, about one in three relied on a financial advisor, and one in four used online or employer-provided resources, Bearden said.

Black retirees and those with an employer-sponsored retirement plan (ESRP) as a major retirement income source relied on their employers more than overall.

Other sources of information include family and friends, their employer, information that they receive at work, representatives from a workplace retirement plan provider and online advice or advisors who offer guidance based on formulas.

In addition, over half of respondents were aware of annuities. Those working with a financial advisor and those with an ESRP as a major source of retirement income were more aware of annuities and investment income than others.

Advisors were the most common source for current awareness on income strategies, and the retirees who use advisors trust them. Black retirees and those with ESRP as a major income source rely on their employers more than overall.

Spending in retirement

Bearden pointed out that more retirees said that what they are spending is higher than what they can afford (17% in 2020 vs 29% in 2022). Blacks, Hispanics and those with a low level of financial knowledge were more likely to indicate that spending is higher than they can afford.

Overall, Bearden said, 54% of respondents said that they saved enough money or more for retirement, compared to about 70% of those with ESRP as major income and those who are working with a financial advisor.

According to the survey, housing costs are higher than expected for about 1 in 4 retirees. Twelve percent of retirees have increased their discretionary spending (vs. 8% in 2020); and 27% have increased their essential spending (vs. 23% in 2020).

Some respondents have also reduced their spending in retirement. When asked why, some cited concerns about inflation, fears about the future and the economy, ongoing market volatility, and less need to spend money now that they are retired.

In addition, the average monthly spending allocation for retirees is as follows: 30% is spent on housing, 26% on food, and 13% on health and medical expenses. Other expenses mentioned by respondents include those for transportation, entertainment, clothing, and contributions to religious, educational, and charitable organizations.

                          

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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