When Retirement Comes Before You Had Planned

Over 50% of people retire earlier than originally planned– and not because they necessarily wanted to.

How it Happens

Why is it that over half of people retire earlier than they originally intended? Many reasons cause retirees to enter their new life stage early, however the most common include health complications and/or disability, personnel downsizing by a company, care for a dependent (child/parent/spouse), and changes in skillset required for the job.

Retirees usually rely on saved investments, pensions, and Social Security to replace earnings in retirement. Depending on how young an employee is when forced into retirement, these normal sources of income have the potential to not be available yet, or if taken, reduced permanently.

Early Withdrawal Implications

Saved Investments – Planned income generation from saved investments can still be an option; however, it is important to take a lower percentage than originally planned. If no adjustment is made to the amount being withdrawn, the likelihood of running out of money increases.

Pensions – If a retiree has a pension, there are certain dates that apply before the benefit can commence. Even if a retiree is eligible to start early, it is almost a guarantee that the early benefit will be less than normal based on actuarial and statistical analysis that factor life expectancy into the final benefit number.

Social Security – For most, the earliest a Social Security benefit can be paid is age 62. There are significant reductions if the benefit is taken before full retirement – between ages 65 and 67, depending on birth year. For every year Social Security is delayed from age 62 to 70, the benefit increases.

Take Control Now

Many early retirements aren’t controllable; however, taking small steps now increases flexibility for the future

Part-time – Retirement looks different now than a generation ago. It can last 30+ years; transitioning from a full to part-time job, or picking up a part-time job now, can help financially and keep retirees connected

Start/increase saving now – This cannot be over-stated and allows for breathing room during financial emergencies and longer compound growth for investing, among other long-term benefits

Watch debt & spending – Increasing spending to reflect increased earnings is natural but keep tabs on it so that if a forced retirement happens, your family is better prepared. Being debt-free is a smart retirement goal as well; having little-to-no debt brings peace of mind and budget flexibility.