Is early retirement on your wish list? Millions of workers will answer yes to that question. In this CNBC article from 2022, the younger the worker, the earlier they hoped to retire, from an average planned age of 59 for those under 40 to age 68 for baby boomers, most of whom are no doubt facing the reality that they might not be as prepared for retirement as they had hoped. 

The fact is, early retirement might not be all it’s cracked up to be. (We wrote in this Blog article not long ago about those who have retired early, only to be plagued with second thoughts.) But for many workers, retiring earlier than expected wasn’t their plan at all. Instead, leaving the workforce years earlier than planned was forced on them by health problems, family issues, or workplace cutbacks. This can trigger a profound shock, emotionally and financially. 

CNBC reporter Lorie Konish wrote this recent article that describes how many workers are blindsided by unexpected circumstances that force them to call it quits years ahead of schedule. If that happens to us, how do we respond, and how do we prepare? Let’s see what Konish suggests. 

More than Half of Workers Retire Earlier Than Planned 

While many workers dream of an early retirement, Konish reminds us of the somewhat harsh reality: “[M]ore than half of workers — 58 percent — retire earlier than they planned, usually due to unforeseen circumstances,” she writes. This is according to new research from Transamerica Center for Retirement Studies in collaboration with Transamerica Institute. 

The median age for early retirement is 62, a full three years short of the “traditional” retirement age of 65, and five years shy of the current full retirement age for most workers which is 67.  

“Of those who retired early, most pointed to health-related reasons, with 46 percent; followed by employment issues, 43 percent; and family reasons, 20 percent,” Konish writes. “Just 21 percent said they retired early because they are financially stable.” 

The Employee Benefit Research Institute had very similar findings earlier this year: half of retirees retired earlier than they expected, and most frequently for reasons they could not control. 

“Severe Financial Implications” from Unplanned Early Retirement 

The ramifications are varied, as you might imagine, but there are definitely financial implications for early retirement, some of them severe.  

Catherine Collinson, CEO of the Transamerica Center for Retirement Studies, says, “Many people may not even realize how severe the consequences can be and how absolutely critical those extra five or 10 years in the workforce can be in terms of achieving retirement security.”  

One of the reasons for this lies in the stipulations around Social Security benefits. Konish explains, “If those new retirees take Social Security benefits before their full retirement age — which is 66 to 67, depending on date of birth — they take permanently reduced benefits. The median age for claiming Social Security benefits is 64, according to EBRI. Retirees stand to get the biggest Social Security benefits if they wait until age 70.” 

Many Ways in Which Early Retirees Miss Out 

There are other financial pitfalls to be aware of, too. Collinson notes that early retirees may lose five years of income, assuming that they intended to retire at their full retirement age of 67. They can also lose potential employer-sponsored benefits and additional credits toward their Social Security work history.  

She adds that they’re also missing out on growth in their savings accounts and investments (assuming they could have left those untapped while employed). Additionally, she says, they have to pay for health insurance until their Medicare eligibility at age 65. It all adds up.  

Forced Early Retirement Requires a Total Financial Reset 

Collinson understands that those forced into early retirement may not have much financial flexibility. But they can and should still come up with a financial plan, helping them assess their future risks and the overall state of their financial health.  

Ted Jenkin, a certified financial planner and the CEO of oXYGen Financial in Atlanta, says that newly retired individuals should try to give themselves time to pause and reset their financial goals if possible.  

When they come back to evaluating their finances, he adds, they should consider whether it would be advantageous to move to a location where taxes may be lower. They should also review the rules that come with COBRA or other health insurance plans. And, lastly, they should take a look at any unused perks that may be available to them, such as credit card rewards.  

Rajiv Says, “You Need a Financial Dashboard!” 

We asked Rajiv Nagaich to comment on this issue of unplanned early retirement. 

“We all know there are some things we can’t control,” he answered. “The economy can get the jitters. The company we work for can get sold out from under us. Unexpected health problems can upset our dreams for the future. I definitely get that. But,” he adds, “if there are things we can’t control, how about focusing our efforts on things we can control?” 

He offers some important examples. “We can keep our skills sharp so, if a layoff happens, we can quickly find other work. We can take care of our health so we minimize the risk of a health crisis. We can learn to live within our means so that we’re not strung out with heavy debt and bills we can’t pay.” 

The most important item on Rajiv’s preparation list shouldn’t come as a surprise. “I tell everyone to sit down with a qualified, objective financial planner and prepare what we call a financial dashboard. It’s a planning tool that will give you unmatched peace of mind, no matter what happens. If you have to do a financial reset, your dashboard will guide you into making the right decisions.”   

Ready to explore this essential financial planning concept? Contact us and we can recommend a qualified planner to help you. 

Rajiv Nagaich – Your Retirement Planning Coach and Guide 

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.  

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read. 

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more. 

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.  

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone! 

(originally reported at www.cnbc.com)