Planning For An Unexpected & Sudden Retirement

If you ask people what their biggest financial asset is, they invariably reply “my home” or “my investments.”  That’s true in dollar terms, but let’s look at a very large asset most folks don’t think about: their working selves.

Your biggest asset comes into play immediately when a financial plan is drawn up. Financial planners create various scenarios for our pre-retirement clients that include investment projections (rates of return), annual savings rates, the cost of various goals, etc. We recommend the optimal time to retire and counsel our clients not to retire too soon. After all – our goal is to reduce the risk of our clients outliving their assets. If we plan on having our clients retire at age 65, we don’t advise them to consider retirement any sooner than that.

So it comes as no surprise that one of the biggest body blows to a financial plan – apart from unexpected death or divorce – is “sudden retirement.”  According to one study, a whopping 41% of retirees stopped working sooner than they planned to. Sudden retirement throws a monkey wrench into financial plans and needs to be dealt with immediately.

“Sudden” or “unwanted” retirement can occur for a number of reasons. The biggest reason is NOT work-related downsizing/elimination of a position (that’s the reason 37% of the time) – it’s actually poor health (54%) and the need to care for a spouse or family member (19%).

What can we financial planners do to help our clients who become “sudden retirees” or who face the risk of “sudden retirement”? Here are some key issues to consider:

1. If you have a financial plan already, your numbers can be adjusted to show the impact of “sudden retirement,” if it occurs. If you lost your job recently, a “sudden retirement” assessment is vital.
2. If you haven’t suffered a “sudden retirement,” have your planner consider the consequences if this did occur in the future. Having alternative scenarios in your financial plan gives your planner some flexibility regarding ways to shore up your financial plan if this occurs.
3. Financial planners can and should recommend clients invest in having a professional assessment of skills/interests to see if there is a fit between current job skills and interests, and other career paths. This is something to explore for those sudden retirees who lost their jobs due to downsizing/elimination of a position.

Your biggest asset may be yourself, but it sometimes takes a professional to match your abilities with a job you otherwise may never have considered. Having a second career can help people bridge the gap between their retirement savings and the prospect of living into their 90s. Truthfully, many or most folks do not expect to live that long and forget their retirement may stretch 30+ years.

I was reading recently about “media leafcutter ants” (Atta cephalotes) in Panama. Like other ants, colony members have different physical attributes to better serve the colony. Foragers, for example, have razor sharp mandibles capable of slicing leaves into small disks so they can be carried back to the nest. Over time, repetitive leaf slicing blunts their mandibles – until foragers no longer can do their job well. Instead of going into “retirement,”  forages shift their role to gathering up sliced leaf parts and carrying them back to the nest.

People are infinitely adaptable and still can contribute toward society (and earn money) if a “sudden retirement” even occurs. Sometimes it takes the work of a financial planner to help pre-retirees recognize their financial plan depends upon returning to work – possibly in another capacity.

 (C) Eve Kaplan, 2011

Eve Kaplan is a Fee-Only Certified Financial Planner in Berkeley Heights. Kaplan Financial Advisors is a Registered Investment Advisor in New Jersey and New York. Her firm provides financial planning for individuals, and 401k/403b plans for companies. She can be reached at 908-898-0549 or

About the author

Eve L. Kaplan, CFP®

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