40% of Recent Retirees Were Forced to End Their Careers Early. Here’s What That Means

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An early workforce exit can have serious consequences. Read on to learn more. 

The U.S. doesn’t have an official retirement age. Medicare begins at age 65, and people born in 1960 or later are entitled to their complete Social Security benefits once they turn 67.

As such, retiring at some point in your mid-to-late 60s is generally considered to mean that you’ve retired “on time.” Retiring before that point is generally considered “early.”

Now, some people actively take steps to set themselves up for an early retirement. But recent data from Edward Jones reveals that according to financial advisors across the industry, 40% of their clients were forced into early retirement. That, however, is highly problematic from a financial standpoint.

Why early retirement can be a bad thing when you don’t get a say in it

There are different reasons why people tend to be pushed into early retirement. For some, it’s a matter of workplace shake-ups that force them out of a job. And let’s face it — it’s hard to start over at a new job or in a new career when you’re in your late 50s or early 60s.

Meanwhile, for other people, health issues can lead to an early retirement that wasn’t planned. If your work is manual in nature, you may reach a point where you can’t physically do it. And you may develop issues that make it impossible to sit at a desk all day and type on a computer.

Unfortunately, early retirement can be a very bad thing when it’s not something you want. When you’re forced to retire early, you risk a host of financial struggles.

Imagine you’re hoping to retire at age 67 and continue funding your IRA until your very last day of work. If you’re forced to retire early at age 60, that’s seven fewer years to make those IRA contributions.

Similarly, if you’re forced to retire early, you may not be able to wait until full retirement age for Social Security benefits. You can claim benefits starting at age 62, but if you’re not entitled to your full monthly benefit until age 67, filing five years early will mean slashing that income stream for life.

Finally, there’s healthcare to worry about. For many people, their health coverage is tied to a job. If you’re forced to retire at age 63 and you’re not eligible for Medicare until age 65, you might have to raid your savings to pay for health insurance until you’re old enough to enroll.

It’s important to start saving early on

You never know when you might end up being one of those people who’s forced to retire ahead of schedule. And the best way to protect yourself from unfavorable financial consequences in that scenario is to start saving for retirement at a young age.

Let’s say you wait until age 40 to begin saving for retirement. If you’re forced to retire at 60, you might fall short of your goals. But if you begin saving for retirement at age 25, by age 60, you’ll have been funding your IRA for 35 years. At that point, you might have enough of a nest egg to cover your expenses without a paycheck from work.

Also remember that the sooner you start saving for retirement, the sooner you can invest your money for additional growth. The stock market has averaged a 10% return over the past 50 years. If you invest $300 a month in an IRA beginning at age 25, by age 60, you’ll have about $976,000, assuming that same 10% average annual return in your portfolio.

But if you don’t start saving and investing that $300 a month until age 40, by age 60, you’ll only have around $206,000 (once again assuming a 10% average annual return). That’s a sum you may not feel as comfortable retiring on.

Involuntary early retirement can, unfortunately, happen to anyone. But if you begin saving at a young age, it’s a situation that may not work out so poorly for you.

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