Early Retirement: Dream or Dilemma?
For many workers, early retirement is the ultimate goal — carefree days filled with road trips, golf, or time spent with friends and family. Yet, reality often tells a different story. Many Americans are retiring years sooner than they expected to, often due to health problems, layoffs, or other unanticipated events. According to the 2024 EBRI Retirement Confidence Survey, the median retirement age in the U.S. is 62 — yet the median expected retirement age is 65.
As a result of premature departures, employers may find themselves facing a host of issues, including knowledge gaps and talent shortages. A robust retirement plan offering, combined with holistic financial wellness initiatives, can help address these challenges by supporting recruitment and retention. And while a generous employer match and auto-features can increase participation and encourage higher savings rates, additional strategies can be considered that aim to reduce unplanned early exits and better prepare workers should they face this all-too-common reality.
Health Care Planning. Employees may leave the workforce earlier than expected, nearly a third (31%) do so due to health issues. As such, integrating health care and retirement planning is an important consideration. Offering health savings accounts (HSAs) to employees enrolled in eligible high-deductible health plans (HDHPs) and providing education on Medicare and long-term care planning can help employees better prepare for the unexpected. Additionally, education on health insurance options for early retirees — including COBRA, ACA marketplace plans, and private insurance options — can help many workers bridge the gap until Medicare eligibility.
Flexible Retirement Options. Allowing employees to gradually reduce their workload while retaining benefits can provide greater financial stability and help them transition into retirement on a timeline of their choosing. Additionally, career development programs for pre-retirement employees, including skills training and even mentorship roles, can help keep them engaged, adaptable, and more financially prepared for their eventual exit. According to Mercer, 38% of companies support later-life working by making project-based or gig roles available to older employees, and 36% are offering part-time, flexible, or phased retirement choices.
Financial Wellness Programming. Plan sponsors should encourage employees to take an early, proactive approach to retirement planning and help them fully understand how timing affects their Social Security benefit. Even simple changes — like optimizing RMD strategies — can have a significant impact on financial security during retirement.
Guaranteed Income Solutions. As the retirement landscape continues to evolve, so do expectations around income sustainability. Guaranteed income solutions can help address these issues, but concerns about administrative complexity, fee transparency, and portability remain. Ultimately, determining whether these options are suitable requires careful evaluation of plan objectives, regulatory considerations, and participant needs.
Addressing the Timing Gap. The challenge for employers is clear: Supporting employees in their retirement journey requires a multipronged approach, from plan design to employment policies to financial wellness. By staying ahead of these trends, plan sponsors can not only help employees achieve a more secure retirement but also help strengthen their organization in the process.
Sources
https://www.ebri.org/docs/default-source/rcs/2024-rcs/rcs_24-fs-2.pdf?sfvrsn=2647072f_1
https://www.mercer.com/en-us/insights/people-strategy/future-of-work/reimaging-work-and-retirement/
Please contact your MCF Advisors Plan Consultant with any questions or to review your current plan and plan’s offerings.
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