When it comes to retirement, many middle-class workers are finding themselves in a precarious position. A significant number of American workers plans to continue working past age 65, or to never retire at all. However, for most of them, their best-laid plans aren’t likely to work out according to a recent survey from the Transamerica Center for Retirement Studies.
Cited in InvestmentNews, the study revealed that 49% of middle-class workers plan to work past 65, with 15% stating they never intend to retire. Their primary motivations are financial necessity and the desire for healthy aging. Catherine Collinson, CEO and president of the nonprofit Transamerica Institute, emphasized that working longer can provide additional income and reduce the time spent in retirement, which can be financially beneficial.
Despite best intentions, the median retirement age remains at 62, and many retirees find themselves leaving the workforce earlier than planned, often due to job loss or personal health issues rather than financial readiness. Ms. Collinson highlighted that very few people retire early because they are financially prepared, which underscores the need for better financial planning and advice.
The Transamerica survey also pointed out that many middle-class workers lack sufficient funds to cover unexpected financial shocks, such as long-term care. This financial vulnerability not only affects retirees, but also puts a burden on their adult children, who may have to step in as caregivers. According to the survey, 38% of non-retired people serve as caregivers, with 80% of that group having to make adjustments to their work situations. Caregiving responsibilities have the potential to jeopardize younger generations’ employment and retirement savings, creating a self-perpetuating cycle of financial instability.
Related, a recent Gallup poll cited by InvestmentNews found that most retirees report having enough money to live comfortably, even as less than half of workers believe they will have enough income to live on in retirement. Gallup found that retirees often benefit more from Social Security and Medicare than they anticipated, and their living costs tend to decrease. However, this is likely not enough to completely offset the financial challenges faced by those who retire earlier than planned.
An encouraging finding from the Transamerica survey was that, among the middle class, their top priorities included:
- Enjoying life (67%)
- Being healthy (62%)
- Focusing on family (45%)
- Planning for financial futures (44%)
- Leading more sustainable lives (28%)
The Transamerica survey included more than 10,000 responses, more than half of which came from people with middle-class household income levels.
The survey results show that while many middle-class workers aspire to work past age 65, the reality is that many won’t likely be able to achieve this goal. This highlights the importance of educating workers on having a retirement backup plan and encouraging them to seek financial advice to better prepare for the uncertainties of retirement. As Collinson aptly put it, “It’s a huge opportunity for the middle class to better their outcomes through more informed decision making.”