Retiring Earlier than Planned: What Matters Most?

Many workers seem to have gotten the message that working longer may be necessary to boost their retirement security. The share of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent in 2018. But such intentions often go awry; data from the Health and Retirement Study indicate that 37 percent of workers retire earlier than planned. This brief, based on a recent paper, reports on a “horse race” to identify which unexpected changes (or “shocks”) are most likely to interfere with retirement plans. The brief proceeds as follows. The first section defines and quantifies earlier-than-planned retirement. The second section describes four potential types of shocks: health, employment, family, and financial. The third section presents the results on which shocks matter the most, taking into account both their potency and prevalence. The final section concludes that health shocks are most important in driving workers to an earlier retirement, followed by job-related changes and family transitions. However, these factors only partly explain early retirements, which suggests that other factors that are harder to measure also play a role.