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When Planning for Retirement, Expect the Unexpected

 retirement planning expect unexpected

Scottish poet Robert Burns famously wrote, “The best-laid plans of mice and men often go awry.” No doubt you likely have a plan for your retirement, even if you might not have a formal written financial plan.

You may know when you want to retire and what you’ll be doing afterwards with your newfound freedom. You may even have a roadmap to get you there.

Now imagine that a big hand reaches down from the sky, crumples up your roadmap, and tosses it aside. But wait, you protest! Too late, your circumstances have changed forever. While that sounds like a stretch, just being caught off-guard with your retirement plan would be less than pleasant, huh?

This is essentially what happened to half of the retirees in The Retirement Preparedness Study from Prudential Retirement. When surveyed, 51 percent said they retired earlier than planned. Sounds good, right? A chance to get to that retirement wish list sooner?

Not exactly. Only 23% retired earlier than planned because they wanted to, either because they had enough money to retire, wanted to retire, or were simply tired of working. Everyone else was dealt an unplanned event, either partially or fully out of their control:

  •  46 percent retired earlier than expected due to health problems
  • 30 percent were laid off from their jobs or offered an incentive package to retire early
  • 11 percent were forced to leave work to care for a loved one

For that 51 percent, their “best-laid plans” went awry, forcing them to adapt to a future they hadn’t foreseen.

Why Retiring Even a Few Years Earlier Than Expected Matters

Generally, people reach the pinnacle of their profession and their earning power during the few years before they retire. Prudential points out that losing those earning years can have a significant impact.

They are the times that contribute to the calculations of a personal earnings history for Social Security benefits, not to mention when you may contribute more money toward retirement accounts. If you have a defined-benefit pension, these earning years also play into calculating your retirement income level for your pension payouts.

Plus, the potential loss of employer-sponsored health insurance, along with increased medical expenses for those retiring early due to health reasons, can further strain financial resources. An analysis by the Urban Institute suggests that those retiring five years earlier than planned could see a 36% reduction in their retirement income as a result. 

Bracing for Certain Uncertainty

Through its poll, Prudential found that pre-retirees seem well-aware of risk factors for retirement. In order of their concern about the potentially negative impact on their retirement savings, pre-retirees listed three factors they felt could instigate early retirement:

  • Illness or disability (43 percent)
  • Losing a job (35 percent), and
  • Taking care of a loved one (12 percent).


Healthcare costs, Social Security program stability, and risks related to the market (inflation, a market crash, market volatility) were other key concerns.

Although pre-retirees seem aware of risks to their planned retirement, Prudential predicts the gap between planned and actual retirement age to continue. Today, pre-retirees have 65 as their target retirement age—higher than the actual retirement age of 59 for the retirees in the study.

Interestingly, 20 percent of pre-retirees expect they will never actually retire. Americans know they have work to do: On average, the study found, they grade themselves a “C” on being prepared to retire.

Give Yourself a Better Grade of Retirement

Whether you are already retired or still working, it's never too late to start planning. Instead of leaving your future to chance, create an action plan that lets you see where you stand, determine where you need to be, and outline the steps to get you there.

Here are some thought triggers to help you plan:

  • Because you could spend as many years in retirement as you did working, have a long-term budget projection outlook. 
  • Prepare an income strategy to supplement your spending goals. 
  • Weighing your retirement accounts, assets, and savings as income sources, will you need to work longer to provide more income or store up more savings? Full-time/part-time work or a combination of the two might be considered.
  • Develop a strategy for Social Security, with its built-in inflation-adjusting benefits. When you decide to start taking benefits can mean tens or hundreds of thousands of dollars in benefits lost or gained.
  • Develop a Medicare strategy. It may cover less than you expect.
  • If you continue working, are there benefits available for part-time work? Employer health coverage eases pressure on soon-to-retire households. And an employer retirement plan gives you another bucket to potentially accumulate savings tax-deferred.
  • Are you maximizing your contributions to your tax-advantaged retirement account(s)?
  • Are you eligible to make higher catch-up contributions to those accounts?
  • Don't underestimate the power of compounding interest, even for just a few years before retirement. Compounding growth adds up quickly and does wonders for accumulating retirement wealth.
  • Consider other tax-deferred vehicles to maximize future savings and income. Deferred annuities may be an excellent choice. They offer some growth potential while protecting your principal, can provide financial safety, are tax-deferred, and can be tapped later for guaranteed income.

Like other investors, you may find the "what ifs" of your retirement future unsettling or unclear. If you want to bring more clarity and confidence to your retirement money matters, guidance from a financial professional can help you.

Research shows that working with a retirement-focused financial professional can bring better outcomes: higher savings, more income, more financial confidence, and overall a better sense of well-being.

Looking for Personal Retirement Guidance?

Nothing ever goes completely according to plan. But if you are ready to build a rock-solid financial strategy, working with a retirement-knowledgeable financial professional can go a long way toward achieving your goals. Or, should you want a secondary evaluation of your existing plan, a retirement guide can help you uncover steps to optimize your current strategy.

At SafeMoney.com, financial professionals stand ready to help you and offer no-obligation initial, goal-discovery consultations. Get started by visiting our "Find a Financial Professional" section to connect with someone directly. Should you need a personal referral, please call us at 877.476.9723.

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