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Planning for an Unexpected Early Retirement

Even with a solid retirement plan in place, life can include big and unexpected changes — often unanticipated. About 46% of retirees left the workforce earlier than planned, according to the 2016 Retirement Confidence Survey released by the Employee Benefit Research Institute.* Corporate restructuring and downsizing are both components of this statistic, but an earlier-than-expected retirement could also happen due to a health condition or the need to care for a loved one. Whatever the reason, if you find yourself looking at an unplanned retirement, it’s crucial that you assess the situation and develop a strategic plan in order to enjoy the years ahead, says Donna Peterson, Retirement Income Strategist for Wells Fargo Advisors.

Think Ahead

If you’re currently working, one way to get an extra layer of protection against unexpected changes is to adjust your potential retirement date. For retirement goals, “target an earlier age,” advises Peterson. For example, if your plan is to work until the age of 65, modify your savings strategy to fit the goal of retiring at age 55. If things go well and you end up working until 65, you have extra income to provide for some luxuries in retirement or pass on to family.

Another way to stay ahead of possible employment changes: evaluate your current skills. If you believe there’s a chance your organization will be eliminating your position in the next few years, think about pursuing education opportunities to update or realign your résumé. You may even opt to switch to a different field or industry if your current line of work comes to an end. While a later-in-life career change may seem daunting, it presents a great opportunity to pursue personal interests and passions that you never had time for in the past.

For medical conditions that increase the odds of an early retirement, it’s worthwhile to look at the alternatives you may have for health insurance. If your current employer provides health coverage, you’ll need to replace this benefit after retiring. Perhaps you have a spouse who works and receives health insurance for the family — check the details of the plan to determine if you can switch to the spouse’s health plan if necessary. Consider adding long-term disability coverage to provide income if you are injured and unable to continue working.

Adjust as Needed

If retirement comes as an unforeseen surprise, and you haven’t had the chance to create a “Plan B,” meet with your financial professionals to evaluate the impact related to the change in income. “Consider your priorities,” suggests Peterson. To reduce expenses, look at what’s important to you and what could easily be given up. It may be a smart time to sell a large home that requires a significant amount of maintenance. If you have two cars, it might be prudent to keep just one of them. Additional modifications, such as reducing gifts to grandchildren or simplifying your retirement lifestyle, could lead to an advantageous budget as well. Using “flexible retirement spending,” where you adjust your spending based on how your investments are performing, may help you make the most of your savings.

Create Opportunities

For an employment-forced early retirement, finding another position may be a key way to bring in income and avoid drawing from your portfolio. While the new line of work might not provide the same level of salary as your previous job, it could be enough to help cover expenses and allow your investments to continue to grow. If you retire early to take care of a loved one, “take inventory of what you have,” suggests Peterson. You may still be able to take on a part-time job or one with a flexible schedule that accommodates your other responsibilities. You might also sell certain assets, such as a vacation home or boat, that are no longer needed.

After creating a contingency strategy for an unexpected early retirement, it’s possible that everything could still follow your original plan. If you end up working longer and saving more, “consider yourself lucky,” says Peterson. You’ll be better equipped to meet your financial goals, enjoy life, and handle any unforeseen events or changes.


This article was written by Wells Fargo Advisors Financial Network and provided courtesy of Chris Hall, Managing Principal in Parkersburg, WV at (866) 865-4442.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC, Member SIPC, a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.

© 2017 Wells Fargo Advisors Financial Network, LLC. All rights reserved.

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