Nearly half of Americans plan to work beyond age 65. But studies show only 19% are able to do so. For some retiring at a younger age is a choice. They’ve saved enough and confidently walk away. But what if you have to retire early? What happens to your finances?

Video: What Happens To Your Finances if You Have To Retire Early?

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Planning to Work Longer and Being Able to Work Longer.

According to a 2018 Gallup poll, working Americans expect to work until age 66. The employee benefit research institute found 48 percent of workers expect to retire after age 65.  After all, working longer tends to improve your retirement finances.

Most of the people in both of those surveys were unable to stay in the workforce as long as they planned. The EBRI found only 19 percent of the workers stayed on the job until age 65. And Gallup found the average retirement age has been 61 since 2011.

Planning to work longer is not the same as being able to work longer.

Lower Social Security Benefits

Retiring early means discounts to your Social Security Benefits.  Depending on your full retirement age and when you retire,  the discounts can reach 30%.  

You may be able to delay Social Security to shrink the discount, but you should beware of adding risk to your retirement savings.  Withdrawing too much increases the probability of running out of money.

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Buying Your Own Health Insurance

You qualify for Medicare at age 65.  If you are forced to retire before then, buying your own insurance can be expensive.  As a couple, you could spend over $1,000 per month for your insurance premiums.

A Smaller Nest Egg

Retiring realy results in less time to save and benefit from compounded returns.  Your “fixed income” is less and your expenses could be more.  We wouldn’t call that an ideal situation. 

Hard Choices and A Backup Plan

Planning to work until age 65 or older isn’t the same thing as being able to work to age 65. But the numbers show we should all have a contingency plan in place. The combination of reduced income and higher expenses–if only temporary–can alter our lives.

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Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.