Planning for the 40% of retirements that occur without warning

Retirement planning is a moving target for many people, and that necessitates having a plan B or even a plan C, financial advisors say.

Sometimes it means crumpling up a plan and tossing it out the window, significantly revising income and spending assumptions. That can be the case for as many as 40% of retirees among individuals who work with advisors, with retirement unexpectedly happening well before they planned for it, according to results of a survey this week from Edward Jones. From that point on, retirement planning means working with what they’ve got.

After all, how can you plan for the unplanned?

“The plan is based on the intentions of the client, and no one ‘plans’ for a forced early retirement,” advisor John Power, principal of Power Plans, said in an email.

At least a few years before a client plans to retire, Power helps them build up cash or a pool of short-term bonds — enough for two or three years of expenses, he said.

“We’ve often looked at retirement expenses, so have an idea of what will or might change,” he said. “Circumstances regularly change with clients, and one must help them recast their plan. In the cases I’ve had, we look at the resources, the needs, the goals, etc., and adjust to the new reality. In the end it has always worked out well enough for them.”

While unplanned retirement isn’t a new phenomenon, it became a major issue in the first year of the Covid pandemic, with about 3 million of the 5.25 million people who left the workforce between March 2020 and August 2021 doing so unexpectedly, according to research from the Federal Reserve Bank of St. Louis. While ahead of the outbreak, 18.3% of the U.S. population was in retirement, that shot up to 19.3% during that timeframe, with more baby boomers suddenly out of work.


According to Edward Jones, 97% of advisors said that even with retirements that occur according to schedule, there are surprises and challenges that clients don’t expect. Some of those wrinkles include increases in the cost of living, providing financial assistance to family or friends, and declines in the value of investments, the survey found.

The firm hired data intelligence company Morning Consult to survey 200 advisors in May.

More than a third of those advisors say that the biggest financial struggles for clients facing unexpected retirements are building a withdrawal strategy and deciding when to start claiming Social Security.

More than half of advisors say they recommend getting supplemental health insurance, while nearly as many say the same about buying long-term care policies, according to Edward Jones. And nearly half say that they tell clients to simply spend less.


Late-career layoffs are a major issue for workers as age discrimination can prevent them from quickly getting other jobs, advisors say.

“Sadly, age discrimination in the workforce is very common, and it can be hard for older workers to reenter the workforce later in their careers,” said Sean Lovison, an advisor at WJL Advisors, which specializes in working with clients who are faced with career transitions. “The good news is that often many, although certainly not all, older workers are actually in a better financial position than they imagined.”

In those cases, Lovison said he reviews clients’ savings, goals, Social Security, pension income, health care coverage, budgeting, emergency funds, risk management, ongoing investments and tax considerations.

“By providing personalized guidance and considering various scenarios, clients are better prepared to adapt to unexpected changes,” he said in an email.


Retiring several years earlier than expected sometimes means cutting back on nonessentials and making lifestyle adjustments, Adam Wojtkowski, an advisor at Copper Beech Wealth Management, said in an email. But laying out flexible options ahead of time is helpful, he said.

“We go through different possible outcomes like job loss, health problems or unexpected family needs that could lead to early retirement,” he said. “This helps us set up an emergency fund, diversify income streams and create investment strategies that consider the possibility of retiring early.”

It’s also important to consider the effects of early retirement on a client’s psychological well-being, Wojtkowski said. “I help clients manage this transition by guiding them and showing them that they can still have a fulfilling and secure retirement even though their situation may not be what they envisioned.”

Advisor Erik Nero, president of First Step Wealth Planning, said he uses a three-bucket retirement planning system for clients: one for covering essentials in case of job loss; another for paycheck replacement designed to cover three to five years before a planned retirement; and another for growth, which can help account for inflation.

“For people over 50, having items that focus on the return of their money versus a return on their money is vital,” Nero said in an email. “The more protected items may not grow as fast, but getting caught flat-footed with an unexpected turn in health or job loss, and a bad market can lead to a lack of good choices.”

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