The Big Pause: Why Are So Many Americans Afraid to Retire?

An older couple look unsure as they look at paperwork together. — (Image credit: Getty Images)

Ready, set … wait just a minute!

This is what it looks like at the starting line of the largest-ever group of Americans who expected to be racing into retirement but are having serious second thoughts about leaving their jobs.

According to the Alliance for Lifetime Income (ALI) 2025 Protected Retirement Income and Planning (PRIP) Study, the only annual retirement study that surveys both consumers and financial advisers, 38% of consumers aged 61 to 65 are considering postponing their retirement, while financial advisers say 28% of their clients have already delayed it.

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The fear of retirement is happening just as our country is hitting Peak 65, when more people are turning 65 — about 11,200 each day — than at any time in history.

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A triple whammy of financial worries

For a growing number of people, a trifecta of worries — inflation concerns, doubts about the viability and future benefits of Social Security, and having sufficient savings — is enough for people to seriously reconsider quitting work.

The survey found:

Inflation (67%) and health care costs (60%) are overwhelmingly the top worries of consumers ages 45 to 75 when asked to identify the top financial concerns in retirement.

58% of those consumers are concerned that Social Security benefits will be reduced based on recent policy actions, and 52% report less confidence in Social Security compared to five years ago.

Given those growing doubts, 35% say they are considering claiming benefits earlier than planned, leaving significantly larger future payouts on the table if they waited to claim.

More than half of Baby Boomers and Gen Xers (54%) are fearful of outliving their savings in retirement, up from 48% in last year's survey.

The research shows retirement jitters are magnified for the 32% who are counting on Social Security as their sole source of guaranteed income in retirement.

Those without a source of protected income — a pension or annuity — are twice as likely (36%) to delay retirement than those without (17%).

Gloomy outlook for Baby Boomers and Gen X

These jitters compound an already challenging situation for Peak 65 consumers aged 61 to 65. According to a recent economic analysis published by the Retirement Income Institute, two-thirds of them will be challenged to meet their financial needs in retirement, let alone maintain their current standard of living.

More than half (52.5%) of these Peak Boomers have assets of $250,000 or less. Given the likelihood of their living 20 or more years in retirement, they are most likely to exhaust their savings and be forced to rely mainly on Social Security, especially later in retirement when long-term care and health care costs are likely to be greater.

The outlook for Gen X is even more uncertain. Life in retirement without a steady source of income will become a bigger factor as only 14% of them have pension plans.

The psychological barrier of walking away from any type of steady paycheck is going to be daunting for many.

Already, 33% of retirees say they are spending faster than anticipated, making it no surprise that 47% say spending money in retirement gives them anxiety.

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That level of worry is reported from a retirement pool with substantially more people who have pensions than Gen X retirees will have. It turns out that "X" may end up standing for anxiety when the time comes for this group to fully leave the workforce.

How to feel more confident about retiring

So what can be done to help Americans get past this great retirement pause and make them feel more confident about retiring, whenever that comes?

First, Congress needs to seriously focus on shoring up Social Security, so people don't have to constantly confront headlines about the program's trust fund going broke sooner than expected.

Rather than wait until the last minute to make the changes needed, policymakers need to move now to ensure workers can count on the promise of Social Security.

Second, financial advisers can help their clients through this period of uncertainty by taking their worries seriously.

The ALI survey suggests this is happening. Sixty-five percent of advisers said they changed their retirement planning approach over the past year to address client worries about market volatility, inflation and rising interest rates.

Over half of advisers said they are putting more client investments into annuities to give investors the protection and confidence they're looking for, which now ranks as the most popular change in investment strategy.

Finally, more people need to seek help from a financial adviser. Generating income in retirement is infinitely more complex than accumulating savings for retirement, so don't go it alone.

The ALI survey shows 70% of consumers working with an adviser are confident in their ability to create a retirement income plan, or twice as many as those working without professional financial help.

Unfortunately, just one in four people work with a financial adviser, according to YouGov data, and one of the biggest barriers to using an adviser is cost.

More people should be trying to find an adviser who can work with them for a fee they can live with, so they can gain the confidence they are lacking to land on a stable, reliable retirement plan.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Recognized as one of the foremost experts and innovators on disrupting and modernizing our concept of retirement, Cyrus is currently Chief Strategy & Communications Officer at the Alliance for Lifetime Income, a nonprofit consumer education association in Washington, D.C., where he leads financial education, thought-leadership and consumer outreach strategies to help Americans think and plan holistically for life in retirement.