How to Protect Yourself Against Unexpected Retirement

The Boston College Center for Retirement Research published a recent report on retirement age and the factors that contribute to people retiring early. The results were not surprising, although there were some interesting takeaways from the research, especially regarding unexpected retirement.[1] The report on retiring early comes from other economic research, which suggests that many Baby Boomers have pushed out their estimated retirement age to 65 and beyond.  Americans are retiring later for a whole host of reasons, from greater expected longevity to reduced retirement savings in their later working years.  Interestingly, only 16% of U.S. workers expected to work past the age of 65 in 1991, while in 2018 nearly 48% of U.S. workers expected to work past 65.  Given the expectation for working past 65 for almost half of Americans today, it is important to understand why people may be forced to retire early—and what plan should be in place to protect families against such contingencies. The paper cites “shocks” as reasons for unexpectedly retiring early.  The two primary shocks that are responsible for unexpectedly early retirement are a change in health and an involuntary job loss.  In the case of involuntary job loss, for those who can find a new job, their ability to work through the age of 65 will actually increase substantially.  So the primary cause of an unexpected retirement—which leads to permanently leaving the workforce—is a deterioration of health.  And while the insight that health is the primary factor in retiring early actually makes good sense, most of us haven’t explicitly planned for such a possibility in our financial lives. Indeed, as families approach retirement age it is important to have a fully developed financial plan that includes the possibility of an unexpected deterioration of health.  While many of us would prefer to work later in life and retire on our own terms, often the choice of retirement is made for us when a health condition emerges. At Brown and Company, we often talk about creating a Plan B™.  Of course, we hope for the best and expect to work and save until we decide to retire on our own terms.  But we also must prepare for a scenario where our income ends a bit before we had planned.  By creating sufficient liquidity and savings several years in advance of our expected retirement, we give ourselves a Plan B™ that allows us to achieve our long-term objective—financial independence for ourselves and our families. We welcome the opportunity to speak with you about your retirement plan, assessing how we might create a Plan B™ that allows for an unexpectedly early end to full-time work. No strategy or plan assures success or protects against loss.   [1] “Retiring Earlier Than Planned: What Matters Most?”  Center for Retirement Research at Boston College.  February 2019.  Online.