What Happens if You Have to Retire Early?

Retirement planning is all about preparing for the future—but of course, even with the most meticulous planning, it’s impossible to predict exactly what the future will hold.

For example, you and your retirement planner may decide that you’ll stay in the workforce until you’re 65, then retire—but what happens if circumstances beyond your control force you to retire a few years early? This could be because you have an accident and become disabled, because you fall ill, or because a loved one falls ill and you need to become a full-time caregiver, among other potential reasons.

An earlier-than-anticipated retirement can naturally cause some concern over your long-term plans. For one thing, spending fewer years in the workforce means you’ll have to start drawing an income sooner and you’ll have less time to add to your retirement savings. You may also face some unexpectedly high medical bills or healthcare expenses.

What to Do if You’re Forced to Retire Early

While an unexpected retirement may require you to sit down with your wealth advisor and tweak your long-term plans a bit, that doesn’t mean you need to panic! A good, robust retirement plan helps you prepare for all contingencies, even early retirement; working with your advisor, you can make a few changes on the fly to ensure the resilience of your retirement plan.

First, ask yourself if you can return to work for a few more years. If you’re forced into retirement due to health issues, this may be a nonstarter. But if you’re laid off or terminated, there may be merit to finding new work, even if it’s just part time—allowing you to generate income for a few more years.

Next, take a look at the retirement plan you have in place. Consider how long your savings will have to last and how much you need to cover your living expenses. You can determine this by totaling up monthly expenses, including any new expenses that weren’t included in your original retirement plan (e.g., medical expenses). Multiply this by the number of years of your estimate (estimating, of course) and adding 3 percent each year for inflation. You can always ask your advisor to help you crunch these numbers and come up with a prudent estimate.

Next, talk with your advisor about making up the difference between what you have and what you need—whether that means reducing expenses somehow, getting part-time work, or taking social security a bit earlier. (Note that this isn’t something to do lightly; taking social security early means your benefits will be a bit smaller, but it may be necessary to make up for your lost income).

The bottom line is that you may not plan to retire early—but it might happen anyway. So long as you remain flexible, and keep communicating with your wealth advisor, there are always solutions to help you weather these changes and plan. To learn more, reach out to Stonepath Wealth Management today.