Being an economist is not my nature. Let me be clear: Most Americans don’t like to take punches. early retirement isn’t just a decision to take the longest vacation of their lives — it’s one of the biggest money mistakes that they will regret.

This is because we, collectively, are. lousy saversThis makes early retirement prohibitively expensive. It’s usually safer and more financially prudent to wait until later in retirement.

According to a Boston College Center for Retirement Research reportThe risk that half of working-age households will experience a significant decline in living standards after retirement is too high for them.^{This share would fall by approximately half if workers retired after two years.}

However, it is possible to retire early in certain situations. Others are able to afford more leisure because they have made careful plans. They have little choice but to do so because they are running out of mental or physical steam. Other people find their jobs outsourced or automated.

Still, almost two-thirds of people — between ages 57 and 66 — choose to retire early out their own volition, despite having saved next to nothing. Most of these people are healthy and able to work, with no impairments.

The baby boomer generation is retiring in droves. Nearly half have little if any savings.

Theirs is a fact median wealth is just $144,000 — less than three years of median household spending. Things would be better if they could rely on significant local, state, or private pensions. They don’t.

Less than 1 in 3A pension is an additional benefit to Social Security. For those who have pensions, most had job opportunities in state or local government which weren’t covered under Social Security.

Worse still, recipients of such pensions could lose the majority or all Social Security benefits they earned from part-time employment in covered work due to Social Security. Windfall Elimination and Government Pension Offset provisions.

Social Security’s average benefit — $18,000 per year — could be far higher, but 94% of retirees take Social Security retirement benefits well before its benefit peaks, at age 70.

Around 85% should wait to reach 70 years old in order for them to be eligible. Inflation adjusted, the age-70 benefit is 76% greater than, say, the age-62 retirement benefit.

Furthermore, Americans can endanger their spouses/ex-spouses by taking Social Security benefits way too early. This could lead to lower benefits for widow(er), and divorcée widow(er).  

Most of us are not able to save because we have lost sight of our life expectancy. This is a common way to plan for the future. 50% of fifty-year-olds won’t save. live beyond age 80. One quarter of the population will. make it to age 90.

Jane is a 40-year old Louisianan who explains what proper saving looks like. Jane, who plans to retire and take Social Security at 62, earns $75,000 per year and has $150,000 in her saving account — an inheritance from a rich uncle.

Jane might live up to 100 years. Jane, like the rest of us can’t expect to die on time. Because she could, Jane needs to make plans to live until her last breath. 

Jane did not save anything. Jane relies on Social Security, her 401k with $150,000 and which her employer and she contribute 3% each year to support her retirement. Jane’s thinking is far off the mark. It is possible that her retirement will last for longer than the time she has worked. She must save 28% each year to retire if she is to live to 100. 

How would Jane feel if she took Social Security when she was 70 years old? Bravo! She will spend more over her lifetime and her required pre-retirement savings rate is lower at 16%. She may even be willing to take the chance of dying young by lowering her life expectancy each year, starting at 80. Her required savings rate now is 13%.

Jane has no savings. She will continue to save nothing if she does so. Her post-retirement living standards will only be half those of pre-retirement!

Jane, however, is in much better health than most. One-third of workers in the private sector don’t have a retirement plan. There are also a few other things to consider. quarter of those that do failYou can even get your employer to match you!

Laurence J. Kotlikoff is an economics professor and the author of “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.” He received his Ph.D. from Harvard University in 1977. He has published columns in The New York Times and WSJ as well as Bloomberg, The Financial Times and Bloomberg. The Economist ranked him among the top 25 economists worldwide in 2014. Follow Laurence via Twitter @Kotlikoff.

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