Studies show that many employees expect to retire later as part of their plan to have more income in retirement.

However, a study from Prudential finds 51% of retirees retired earlier than planned. Among those, only 23% retired earlier than planned because they either had enough money to retire, wanted to retire, or were tired of working. Forty-six percent of those who retired earlier than expected did so due to health problems, 30% were laid off from their jobs or offered an early retirement incentive package, and 11% left work to take care of a loved one.

Not only did retirement occur earlier than planned for many, but the gap between average actual and expected retirement ages was significant. Of those who retired earlier than planned, half (50%) retired five or more years early. Prudential says this is especially important because the last several years of individuals’ careers are generally considered to be among their top earning years, and provide an opportunity to boost the inputs that may drive retirement income levels from Social Security benefits and defined benefit (DB) plan income, if any is available.

Other forces may converge to strain individuals’ financial resources in the event of an unplanned early retirement. Obviously individuals will have additional years in which to provide retirement income—some of which may occur before individuals become eligible for Social Security benefits. In addition, individuals retiring earlier than planned may start retirement with a lower level of assets because they have fewer years in which to build a nest egg. And, the potential loss of employer-sponsored health insurance, coupled with an increase in out-of-pocket expenses for individuals retiring for health reasons, may further strain financial resources.

Prudential cites an analysis by the Urban Institute that reveals working an additional five years would result in a 56% increase in retirement income based on the incremental net wealth accumulated. Said another way, this translates into a 36% reduction in retirement income needed for individuals retiring five years early.

Pre-retirees should expect the unexpected

Prudential found pre-retirees seem well-aware of risk factors for retirement. When asked about their greatest concerns that could negatively affect retirement savings, three of the factors cited—illness or disability (43%), losing a job (35%), and taking care of a loved one (12%)—could “force” an early retirement.

Other concerns pre-retirees listed were health care costs (the top concern), potential changes to the Social Security program, and market factors, such as inflation, a market crash, and market volatility.

Although pre-retirees seem aware of risks to their planned retirement, Prudential expects the gap between expected and actual retirement age is likely to continue. Today’s pre-retirees target a retirement age of 65, which is much higher than the actual retirement age of 59 for the retirees in the study. Moreover, 20% of pre-retirees expect they will never retire.

In addition, when it comes to actually being prepared to retire, Americans, on average, grade themselves a “C”—and this grade assumes their current expected retirement age.

It is clear that many pre-retirees could benefit from a financial plan, according to Prudential. Nearly three-quarters of pre-retirees (74%) agree that they should be doing more to prepare for retirement, but 40% say they simply don’t know what to do. Over half (54%) of pre-retirees have less than $150,000 saved in their employer-sponsored plans. On a positive note, pre-retirees, on average, have started saving earlier (at age 30) than retirees started saving (at age 39).