Early Retirement? You May Not Have a Choice.

Adam Stoeckler, CFP® |

When it comes to retirement planning, most people think in terms of where they want to live, what hobbies or interests they wish to pursue and what charitable organizations they would like to bless during their golden years. As financial planners our job is to determine how much you need to start setting aside, and how it should be invested, to achieve your retirement dream. At this point the conversation is normally settled and the client is directed to save a certain amount in an employer sponsored retirement plan or a Traditional IRA/Roth IRA mix. However, what happens when things go awry and retirement approaches your doorstep before you expected it, will you be prepared? 

Life goals are apt to change over the years, and at times well planned goals do not fall in place as expected, due to unforeseen circumstances. Retirement is no exception, life happens and early retirement, which was not originally part of the plan, may be a forced reality. The cause for unemployment can vary, possibly due to a disability, or a consolidation of the industry that you have worked in for 30 plus years. Losing your job during the mid to late career stage can be especially devastating if you’re unable to get hired elsewhere, and you’re 10 years or so from first being eligible for Social Security. Social Security does not allow for early hardship distributions. And even if you’re able to find a new job, it may not provide the income that your current lifestyle demands. 

Personal savings nationally is on the decline, and state governments across the US have taken notice and are enforcing laws to mandate that employers open personal IRAs for their employees, and automatically enrolling them in a savings plan. Federal Reserve data from 2019 shows that only about 30% of non-retirees currently have IRA savings.[1] With the small number of employers that still offer defined benefit pension plans, this leaves many American households fully dependent on Social Security as their sole retirement income source. If an early retirement then is forced, before Social Security is available (first available at age 62), this could create an income shortage, either driving individuals to exhaust whatever personal savings they have, or driving them to resort to a bare minimum lifestyle, just to survive. Not to mention that if disability is the reason for unemployment, extra medical attention and care facilities, can increase the cost of retirement.

Depending solely on Social Security to fund your retirement income needs is not an ideal solution, and planning your retirement assuming a full work life expectancy may not address the havoc an unplanned event could have on your household. A financial planner can help you design a retirement plan suited to your dreams, as well as incorporate the variability of inputs life throws at you, so that you can adequately prepare yourself for whatever might happen. If you would like to continue this conversation with one of our financial planners, feel free to contact our office.


This Message is provided for information purposes and should not be construed as a solicitation or offer to buy or sell any securities or financial instruments, or to provide investment advice in any jurisdiction where the sender is not properly licensed or permitted to do so.


[1] Welsch, Andrew. “The opportunity in state-mandated IRAs.” Financial Planning, May 2021, 30-31.