Retiring early can trigger financial shortfall

Retiring three years earlier than expected significantly increases the chances of not meeting retirement income needs, putting greater emphasis on the benefits of working longer or working part time in retirement years.

Each year of early retirement before age 65 significantly increases the chance of running out of money in retirement, according to new research from Allspring Global Investments.

Meanwhile, working part time (10 hours per week) after 65 significantly decreases the chance of funds drying up. In fact, part-time work can reduce the risk of a retirement income shortfall—from 12% to 5%, according to Allspring’s research. Working longer also can allow for a higher standard of living in retirement. 

“This idea of people working longer is huge. It’s lengthening the financial runway and making people feel more confident,” said Nate Miles, Allspring’s head of retirement.

In the study, 58% of current retirees left work between 55 and 65 years old. 

A total of 45% of people retired younger than expected. Almost one in four early retirees had an unexpected retirement due to a job loss. Other factors included health issues or health of a family member, the study found.

On a brighter note, when people retired early, 28% did so because they were ahead of their financial goals, Miles said. The research also showed that 87% of retirees considered themselves happy and 81% were confident in the retirement. 

It’s the near-retirees that had more concerns.

“Near-retirees expressed a host of concerns. I think it’s the fear of the unknown,” Miles said. “Near-retirees are also more worried about macro factors.”

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Among the near-retirees in study, 46% expect to retire later, or between 65 and 75. Also, 30% of near-retirees expect to work in retirement, Allsprings found. One in four near-retirees were delaying retirement or expecting a lower quality of life in retirement because of economic conditions, the study found.

“A key takeaway from our research is retirees are doing well but near-retirees are struggling and concerned,” said Ron Cohen, Allspring’s head of defined contribution investment only distribution. “The three biggest areas of concern we found revolved around taxation, Social Security, and Medicare, and these topics are ripe for guidance and education.”

Women also felt less confident about their retirement savings.

Fewer female near-retirees (58%) are confident they know how much retirement income they’ll need versus men (74%). 

A total of 69% of women retirees were confident their savings will last, versus 87% of men. Among both retirees and near-retirees, 31% of women are anxious about their financial life, versus 19% of men. 

Black savers were affected more by the pandemic financially and expect to retire two years later, across income levels, yet they feel a greater sense of resiliency, the study found.

“Underrepresented groups in particular have unique needs, which we look to research and understand so that we can help these investors achieve better outcomes,” said Sonya Rorie, Allspring’s deputy chief diversity officer.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? Write to and we may use your question in a future story.

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