Misconceptions About Retirement May Lead Many Seniors To Unretire

One recent survey from Nationwide highlights some of the financial realities that many retired people are currently facing - realities that will soon similarly affect many a great many more people, with an estimated 12 thousand US workers reaching the age of 65 every single day throughout 2024, many of whom are far from financially prepared to leave their work life and career in the past. 

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According to survey results gathered from more than 1 thousand US seniors between the ages of 60 and 65, about 64% of respondents had retired earlier than originally planned with an average retirement age of 60 years old, and of the respondents who are already retired, more than 1 in 3 are currently considering returning to work again.

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Among those retired respondents who are considering returning to work, about half of the group lists concerns of running out of money as their primary motivation for returning to the workforce.

What’s Causing Retirees To Cut Their Retirements Short

Some of the most common factors that respondents fear may result in a premature end to their early retirement include: 

• Inflation, which was cited by more respondents than any other factor, with 90% of retired respondents listing inflation as one of the primary reasons they may return to work;
• Social Security Cuts and/or the threat of cuts in the future, which was listed as a main factor by 84% of retired respondents; and
• Medicare Cuts, which were listed by 83% of retired respondents as one of the top concerns that was inspiring them to get back to work.

Retirement Expectations vs. Reality

One thing the data makes clear is that overestimated income plus underestimated expenses will equal reduced retirement security, which is an equation that has become all too relevant for the majority of retired respondents. 

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Some of the biggest gaps between the retirement conditions that retired respondents expected to find and the actual retirement conditions they are experiencing include:

• Overestimating Income: About 36% of retired respondents reported receiving smaller social security checks than they had anticipated, for example.
• Underestimating Expenses: Many retirement budgets allocate about 42% of monthly income toward food, housing, and other basic needs, but that percentage has often ended up being closer to about 53%, which is an 11% difference that can add up quickly.
• Underestimated Retirement Security: Only 68% of responding retirees claimed that they feel financially comfortable, which contrasts sharply with the 77% of respondents who are currently still working but expect to feel financially comfortable throughout their retirement.

How Can Employers Help Bridge These Divides

One of the main factors leading to retirement disillusionment is a lack of education on the matter among the workforce, and only about 37% of respondents have received any retirement information or guidance from a financial advisor.

By not only providing retirement savings structure and making matching contributions but also by imparting education about retirement planing and best best practices, employers have the opportunity to help their workers avoid costly and all too common retirement pitfalls, including:

• Drawing Down Social Security Before Hitting Retirement Age, which 58% of respondents had done;
• Accessing Retirement Accounts Prematurely, which 34% of respondents had done; and
• Taking Out 401k Loans, which 17% of respondents had done despite the taxes and penalties risked.

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You can read more about this research and the accompanying analysis here. 

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