Millions of people are retiring earlier than they planned. Are you ready if you're next? Welcome in. Glad to see you again here. I'm Ben George.
He's Jake Dozer, one of the members of the advising team at Rosewood Wealth Management. Talk about retiring early. And like, the thing is, a lot of research is showing that people are retiring earlier than 65, but it's often not by choice. And there's a gap that exists. And we're kind of talking about that today, what it means for your plan.
So, Jake, let's kind of set it up here with a couple of studies that came out this year from Alliance, EBRI, and the Society of Actuaries. They each found the same basic thing from a different angle: somewhere between 42% and 59% of retirees left the workforce sooner than they planned, and not by a little either. On average, people left about three years earlier, closer to 62. And it was really not out of choice. It was not because they said, hey, I'm done with working, I'm ready to get out of here.
Health issues and job loss were the top of the list of reasons why.
So, just kind of hearing that, your initial kind of gut reaction to that three-year gap between people expect to retire and when they're actually retiring.
So, number one, I believe it. you know sometimes you hear these subjects and and this is true if you're in a niche industry like we are um where everybody's got an angle like so for instance the first group of people who released the study was alliance a l ianz alliance is a huge insurance company well they sell products like annuities that create guaranteed income so if they were the only ones coming out with this article i'd say well yeah of course they want to pitch you into their product that creates income guaranteed and there's nothing wrong with that necessarily but there's an angle but here's the interesting thing then you have the society of actuaries who are the like nerd nerds like those are the nerds the accountants go to with questions and they're the ones who like are hypercritical of those types of people so when you got two people from the opposite sides agreeing it's true and the final thing is and i can just share this with anecdotally is that social security administration reports and regularly that the average retiree starts collecting their social security benefit depending on the year 62 or 63 but it's also always right there 62 Is the earliest you could take it.
So I believe it. The other thing is, just life a lot of times throws us curveballs. You know, whether it be illness, health, whether it be the health of a loved one. Whether it be unexpected job loss, that's been something in the past couple of years. Bigger companies laying people off, especially with this wave of AI and job reports post-COVID.
So that's been a little bit of a bigger thing in the past few years. That's not unlikely and unreasonable.
So I buy it. I see the data out there. I've seen it anecdotally. And you need to be prepared. And you need to be prepared before that golden date happens.
Because as you can tell, it doesn't always work exactly the way you want it to.
Well, you mentioned being prepared. I mean, when you think about this three-year gap.
Some people that maybe don't think about the planning aspect of this and don't see the big picture might think, yeah, a few years, that's not a huge deal. But a lot happens in that three years before retirement, doesn't it? Right. Oh yeah. I mean, I've seen this personally in my own family.
My grandparents took me in when I was nine or 10 years old. My parents were getting divorced, nasty divorce fueled by drug and alcohol addiction. And my grandparents took me in basically before child protection services could take me. And I went to live with them and they were in their late 50s. And my grandfather was planning to retire and ended up having to push his retirement back a little bit because I came to live with him.
But the opposite was true with my grandmother. My grandmother brought me in, and within a year, she found out two things: A, the school district could no longer afford two librarians, which is wild that two librarians serviced an entire school district. But she was one of the two, and she had nine months less tenure, even though she had over 30 years of experience. And so, Gail Billings, Mrs. Billings, the local librarian who's.
who I've ran into dozens of her students that she has taught how to read. And I have met more than a handful of people. that I l I met learn how to read by her and then their children learn how to read by her. And because of nine months of experience, I was told at the end of this year you won't have a job anymore. Which obviously was unexpected.
And oh, by the way, your pension's going to be less than you thought it was because the the board that was in charge of keeping your pension funded. It's underfunded.
So in that example, life throws them a big curveball of me coming to live with them. My grandfather has to push his retirement date. And then my grandma loses her job and gets her pension cut. And so it's a perfect example of like, I've seen this play out both with clients and with family. And I'm really glad my grandparents had a plan.
And yeah, they had to adjust it a little bit. But had they had to build one from scratch before something like that happened, it would have been a totally highly stressful experience. And it could have been the, it could have resulted in, can we afford to have Jacob living with us? That would have been the worst case scenario for me.
So, man, planning is, it's important. Obviously, that's what I preach all the time, but I've seen it. Yeah. Yeah. The other thing about this research, it found that the high earners are more likely to retire early by choice, whereas lower earners are mainly doing that because they're forced out.
I'm curious if this is something you see. And I guess, I mean, it makes sense that, hey, if I have more saved, I have more flexibility, right? But You know, how do you get there? Yeah, I mean, I think that it's exactly right. Is the better you've accumulated and oftentimes more money as the result of higher income, of course, the easier you can segwing into early retirement because you want to.
That starts first to identify: are you on track to be able to retire when you want to, let alone early? That should be something you can articulate through a planning conversation. And not only could you, but you should. You should have that answer, even if you don't feel like a high-income earner or somebody with a lot of money. Not only that, is a lot of times people are concerned about health insurance.
And the more you've prepared from a tax perspective and an accumulation perspective, the better you can handle that big change. But then, It's also true that the less one is saved, the more often that you can be forced out. I don't know if I would say that. You know Yes, I would agree that that's true in my experience.
However, I've seen plenty of people who have saved well that have been forced out of work. As well. There are some jobs where the higher you work up the corporate ladder. The harder it is to find a replacement job. And so I've seen just as many people with a lot of income, high-income earners, career-oriented people get forced out.
They have a greater level of expertise, so it's harder to replace that role. They make more money, and maybe the reality is an employer doesn't want to hire a 60-year-old at that high level of income, which is wrong and illegal, but it happens and everyone knows it. You know, so regardless of where your income falls, you need to be prepared to retire when you want to and ideally be able to figure it out before then, or at least have a source that you can bounce ideas off of to make those adjustments on the fly when life inevitably throws you that curveball.
Well, let's say somebody came to you now then, Jake, and said, hey, I want to kind of see what it would look like if if I had to retire three years earlier than I anticipated, kind of like the scenario we're talking about. What would that conversation look like at Rosewood? I mean, this is something John and I had yesterday, a conversation. This is something we happen all the time. It's something we encourage.
It's frankly a question sometimes, even people don't ask me. I encourage them to think about: hey, you know, you could retire earlier than you want to, right? Do you want to look at that? A lot of times, what it looks like is: hey, if you retired earlier, what would you do with this newfound freedom? What does it mean for your health insurance?
Let's game out what that increase costs for the expected, unexpected, or what have you looks to your expenses. Is that an affordable metric for you? Could you increase your income there? How much wiggle room does that give you? What does it cause you to sacrifice, if anything, in order to get those three years?
You know, could you buy those three years and you still have money left in the tank when you will pass away?
Well, then, as long as you're okay with the kids getting a little bit less. Why not? Or if the goal is I want to work as long as possible, well, what's the flip side is true too. If you want to work as long as possible, well, what are you gaining? Unless, you know, if you're at the place where you've got this giant pile of money, And you're not going to run out.
Well, unless you love what you do, why keep working? Because you're at the place where, okay, now instead of you having an extra million dollars, you have an extra $2 million.
Well, neither scenario is a bad deck of cards to play, you know?
So figure out where you're at, be able to have an actionable conversation of what it looks like materially to retire early if that's what you want. And then how do you get there?
Well, those are planning levers that you can pull. And it all comes down to what are the trade-offs that I have to make in order to. Make that happen. And then, which one's the most important thing? And two, planning, a good plan is going to hold up, you know, no matter what life gives you, right?
Whether it be retiring early or something happens in retirement, you build a plan that can work with these different life changes and can evolve and meet the needs of you and your family, right? That's exactly right. Planning is kind of like building a constitution. You know, the constitution is sort of this living, breathing document that adapts over time. And your plan should too, but it has to first be adapted to The default that you want, so that you can then make the in-the-moment adjustments so that life doesn't derail your retirement.
Well, nobody plans to retire early necessarily, but the data is showing us that more and more people are doing so and not always by choice. You want to make sure you're prepared, make sure you're ready for that possibility. If it happens, the best way to do that is to plan.
So, if you want to get in touch with Rosewood Wealth Management, I encourage you to do so. You'll find that contact information down in the show description. You'll be able to get in touch with Jake and John and begin talking about some of these things, some of these concerns, and making sure you have a plan to move forward. But we appreciate you watching. We'll talk to you again soon.
Please subscribe. Hope you have a great week. Carolina Wealth Stewards doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.
