Many Americans are finding themselves retiring earlier than they had originally planned, and a substantial portion of these individuals later express regret about their retirement savings, according to a new report from the TIAA Institute.
The report, titled "Bridging the Gaps in Retirement Expectations," highlights a common trend where workers retire before they are financially prepared. The survey found that the average retiree is 57 years old, with 52% of those surveyed retiring earlier than they had anticipated. Conversely, only 6% retired later than planned.
In contrast, the average working American surveyed expects to retire at age 62, a full five years later than the current average retiree. The survey included responses from 1,591 adults aged 22 to 75.
This finding aligns with previous research from organizations like the Employee Benefit Research Institute and the Transamerica Center for Retirement Studies, which have consistently shown that American workers tend to retire around age 62, often earlier than their initial projections.
Workers commonly plan around milestone ages such as 65 (when Medicare is available), 62 (when Social Security benefits can typically be claimed), and 67 (the full retirement age for many under Social Security). However, the TIAA Institute points out that retirement is frequently not a choice but a sudden event, often triggered by unexpected circumstances like corporate layoffs, health setbacks, caregiving responsibilities, or even technological displacement like AI.
Surya Kolluri, head of TIAA Institute, emphasized the emotional weight of regret, stating, “People are expressing regret. That’s a powerful emotion. We can take that emotion and apply it to people who have not left the workforce.”
Retiring unexpectedly and earlier than planned can significantly disrupt financial strategies. For instance, a worker aiming to save $500,000 for retirement at age 65 might face a shortfall if laid off at 60. This scenario means five fewer years for saving and five more years of expenses to cover, all while not yet being eligible for Social Security or Medicare benefits.
Kolluri advises workers to plan for a retirement that may commence sooner than anticipated. He suggests creating savings plans that accommodate earlier retirement dates and longer durations, recommending the consideration of three potential retirement ages: 57, 62, and 65.
Workplace retirement savings plans, such as 401(k)s, are deemed increasingly vital for meeting these evolving retirement goals. The TIAA Institute survey found that 70% of workers have access to a 401(k)-type plan, and 89% of those with access are enrolled. A significant majority (three-fifths) of these savers were automatically enrolled, a feature credited with boosting savings rates.
Starting in 2025, new 401(k) plans are mandated to automatically enroll employees, a move expected to enhance retirement savings nationwide.
For individuals looking to bolster their retirement savings, the report suggests maximizing contributions to tax-advantaged accounts. The 401(k) has a 2026 contribution limit of $24,500, with higher limits for those aged 50 and older ($32,500) and even higher for those aged 60-63 ($35,750). Individual Retirement Accounts (IRAs) have lower limits: $7,500, or $8,600 for those 50 and older.
Delaying retirement, even by a short period, can substantially increase savings. A Stanford University study indicated that postponing retirement by just three to six months can be as impactful as increasing 401(k) contributions by a full percentage point over 30 years. A year's delay could allow for maximum contributions and prevent drawing down existing savings, thus extending their longevity.
Retirement experts also recommend maintaining a readily accessible emergency fund. Ideally, individuals should aim to have at least one year's worth of living expenses in cash or cash-equivalent accounts, such as high-yield savings or money market funds, to cover immediate needs as retirement approaches.
In the TIAA Institute survey, released July 22, the average retiree said they had retired at age 57. Of those retirees, 52% said they retired earlier than expected, while only 6% said they retired later than planned.
Now, let’s say that worker gets laid off at 60 and can’t find another job. That means they have five fewer years to save for retirement, and those savings must fund five more years of retirement.
