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Early or Late Retirement?

Posted May 13 2013 8:30am

For all my life, 65 was the traditional retirement age. In the United States, that number came into general use for this purpose when Social Security was created in 1935, and 65 was set then as the age to receive full benefits.

In fact, before Social Security, the idea of retirement barely existed. It's invention is traditionally attributed to then-Chancellor Otto von Bismarck of Germany in 1865, when he announced a government pension to any non-working German 65 or older thereby inventing in one fell swoop both Social Security and the year at which old age is said to begin.

(There were, of course, political reasons for Bismarck's move. If you're interested, look it up – it doesn't apply to today's post.)

Nowadays, the age for full Social Security benefits in the U.S. is 66 and rising. By 2027 it will have reached the “new normal” of age 67 – one of the oldest in the developed world. Only Germany at 67 and the U.K. at age 68 match or surpass the U.S. although some other countries are beginning to increase retirement age.

Over the weekend, I came across a new study from Merrill Lynch [pdf] about retirement. Of course, because Merrill is an investment firm, it is mostly about financially well-off people – the kind with money to invest which I doubt is a majority. But a couple of their charts caught my attention.

This one, for example, about the percentage of people who retired early, at the age planned or later than scheduled (asked of retirees only):

Percent Retiring on Time

(The survey was conducted from December 2012 through January 2013 of 6300 people age 45 and older - approximately half with investable assets of between $250,000 and $3 million.)

I was struck by what seems to me to be a huge number who retired earlier than intended – 57 percent. What could be the reason for such a high number leaving the workforce?

At age 63, I retired long before I had any thought of doing so. A year after being laid off, I had not found work, was digging myself into a gigantic debt hole and the only way out was to sell my home. Not an ideal situation.

So I wondered how many others, particularly after the financial collapse, had been forced into a path similar to mine.

Well, there's a Merrill Lynch chart for that giving five reasons:

• Personal health problem
• Sufficient financial resources to retire
• Lost my job
• More time with family
• Had to look after a family member

Here's the chart with the percentages. It's obviously way too tiny to read so click it for a larger view.

Nearly one-quarter, like me, retired because they lost their job. Unfortunately, the survey doesn't give ages at which that 24 percent retired or tell us if they spent a lot of time working their tails off to find work only to be thwarted by age discrimination.

It's true I can't prove that last statement but it's a good indication what's going on when an interviewer who thought you were hot stuff at 4PM yesterday on the telephone informs you in person at 10AM the next day that the job has been filled and oh, my – so sorry someone forgot to phone you.

And although the number of people age 55 and older who are working is up by more than 4 million since 2009, it takes a full year – 51.3 months – for old people to find work. And that's counting only the ones who do find work. Two million more, as of December 2012, were still looking.

As awful as unemployment is for workers of all ages, for older ones there are not the years left to make up the lost wages and savings that (hopefully) the younger ones will have.

So what happens when a person is forced to take early Social Security is that the benefit amount is reduced from about 25 percent (at age 62) to 6.7 percent (at age 65) for the rest of your life.

I was luckier than many people. Although I was laid off at age 63, spent until age 64 looking for work and another year waiting for my home to sell, I was able to squeak by – thanks to a good price for my home – with careful frugality until I reached full Social Security age of 65 and eight months.

The question today is, did you retire early and if so, under what circumstances? If you are not yet retired, what are your plans and will you be able to fulfill them?

As always with personal questions, feel free to post anonymously in the comments.

At The Elder Storytelling Place today, Deb Cavel-Greant: Sometimes It's Best to Keep Your Mouth Shut

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