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 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
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