Why do people retire earlier than they'd planned? According to new research, it's all about health.
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"We found clear evidence that some of the health shocks seemed to really matter for people's expectations — that is, they adjusted them towards retiring earlier," said Jonathan Leganza, a co-author of the study and an economics professor at
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Every year, millions of Americans retire at an earlier age than they'd expected. In 2022, less than half the country's retirees said they'd left the workforce because they'd "reached a normal retirement age," according to the
TIAA went into more detail, measuring the impact of specific illnesses. A new diagnosis of cancer, for example, reduced the chances of working past age 62 by 16.4%. Lung disease reduced those chances by 26.4%, and arthritis lowered them by 10.2%.
How did these health reasons compare to other factors, like financial and family changes? TIAA said it wasn't even close. In some cases, the effects of economic changes — such as a layoff or changes in income — were not only smaller, but negligible.
"We find no statistically significant evidence that unemployment between ages 50 and 60 leads people to adjust their retirement expectations," the study said. "For earnings gains, we find some evidence of declines in the probabilities of working later, although the graphical evidence is less clear than for the health shocks."
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It was a similar story for "family shocks," including divorce and, in a more positive example, the birth of a grandchild. In both cases, TIAA said, the effect on retirement timing was "not statistically significant."
"That category was similar to economic events, where the evidence was just less clear that these family shocks led to changes in expectations one way or the other," Leganza said.
Based on their own experience with clients, many retirement advisors agreed that health issues are the biggest drivers of early retirement.
"Very few people retire early because they have so much money," said William Schretter, a CFP at
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And it's not just the client's own health that matters. When a family member falls ill, many Americans take on the role of caretaker, leaving little time for professional work. According to the Fed, 17% of U.S. retirees left the workforce to take care of a relative.
"Unexpected health situations can have a significant impact on … pre-retirees, as they can be left caring for aging parents who are seeing health issues emerge," said Tim Bauer, founder of
Another way health can spur early retirement is through a "scare." If an aging worker suffers a heart attack or another sudden health crisis — even if they fully recover — they may decide to start their golden years sooner.
"In some cases, a person has a heart scare and decides that life is too short to wait until 65," Schretter said.
The ages the study examined, 62 and 65, have special significance in the United States: 62 is the earliest age at which a person can file for
But as TIAA's findings indicate, health issues might preclude many Americans from working until or beyond those ages.
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"I think that in general we think about working longer as being one way to increase retirement readiness," Leganza said. "But I think what our results are illustrating is that might not be a possible solution for everybody."
The study also has implications for wealth management. In terms of financial advising, little can be done to ward off a cancer diagnosis or a heart attack. But TIAA's findings show how important it is to factor in a client's health history — and their family's — when making plans for their retirement.
"In order to know how to save appropriately, you need to know how long you'll be retired," Leganza said. "What our research is showing is that some of these events affect how long you'll be retired. And so it's kind of a first step to thinking about how to adjust savings."
