How Americans Can Regain Control Over When to Retire

According to The Pew Charitable Trusts’ recent survey of American workers ages 18-64, many people are uncertain when—or even if—they’ll fully retire. Nearly two-thirds of the 2,918 respondents said they were likely to work past age 65, a finding that was most prevalent among male, low-income, and full-time workers. And while some said they prefer to work past 65, the majority felt they would be forced to do so out of financial necessity.

The uncertainty many workers feel about when to retire can stem from such trends as stagnant wages, increasing life spans, and lack of health insurance coverage. But changes in how Americans earn a secure retirement also play a critical role—in particular, the 40-year transition from traditional defined benefit pension plans to defined contribution retirement savings plans such as an IRA or 401(k). Defined benefit plans, what we often call pensions, promise a precise benefit for life beginning at a specific age or after a certain length of service, which greatly helps in planning for retirement. In contrast, planning with a defined contribution account is more difficult because the accumulated savings can vary depending on the amount contributed and the investment returns. Even when retirees know the amount in their account, many find it challenging to determine how much to periodically withdraw to cover what could be an extended retirement.

As a result, many Americans lose control over the timing of their retirement. According to the Transamerica Center for Retirement Studies, only a third of retired Americans stopped working when they had planned. Perhaps reflecting this loss of control over retirement, many Americans are staying on the job longer. According to respondents to the Pew survey, workers across the income spectrum said they would continue to work out of necessity. Not surprisingly, those in households earning $100,000 or more were the least likely to say they would continue to work out of necessity. People with high-paying jobs may not need to work longer, but they often are in a better position to do so because their work is usually less physically demanding and allows for more flexible hours. Retiring earlier than planned has its own challenges. Workers who choose to, or are forced to, retire early might not have enough savings to cover a longer-than-expected retirement, which in turn may require federal and state governments to provide additional assistance to low-income retirees.

There are ways for employees to gain greater control over the timing of their retirement, allowing them to leave the workforce when they planned. Perhaps the most effective is starting to save early. According to Transamerica, 31 percent of retirees started saving before age 40, while 39 percent started saving after that age. And an alarming 30 percent of retirees didn’t save for retirement at all.

Planning for retirement is difficult, but it’s a challenge that policymakers can help address. To give people greater certainty about their financial futures, decision-makers should look for ways to increase access to retirement savings plans and boost participation and savings rates when workers do have access to a plan. Doing so will help ease the concerns of Americans about when they can begin—and whether they’ll be able to afford—a comfortable and secure retirement.

This article was originally published on Forbes on November 28, 2018.