3 Retirement Curveballs to Watch Out For

Once you ease past age 55 or so, retirement planning hits a new phase where you are actively thinking about the timing of when you might stop your full-time career work.

I hope each of you does it on your terms, according to your plan.

But I hope your plan also considers the possibility that things don’t always go according to plan.

The Employee Benefit Research Institute’s annual Retirement Confidence Survey highlights three ways in which well-intentioned retirement planning assumptions often don’t pan out as expected.

1. Working for Pay in Retirement. This year’s survey finds that 3 in 4 people working expect to also keep earning money in retirement. However, in reality, only 3 in 10 people surveyed who are retired are working for pay.

2. Early Retirement on Your Own Terms. About two-thirds of people surveyed who reported they retired earlier than planned said it wasn’t their idea. About 30% said they stopped working due to downsizing or other strategic staffing changes at their job, and another 30% had a health problem or disability that pushed them to retire early. Some people reported stopping work earlier to care for a spouse or another family member.

3. Retirement as a Gentle Glide. Half of the surveyed workers said they plan to have a gradual transition to retirement where they have reduced hours, rather than a cold-turkey full-time stop. Yet nearly 3 in 4 retirees said they, in fact, didn’t have the gradual transition, and instead did an abrupt change from working on Friday and being retired on the following Monday.

All of this suggests that the best-laid retirement plans aren’t guaranteed.

My hope is that you will now incorporate this uncertainty into your later-stage retirement planning. Write down your key assumptions about when you will retire, how you will retire, and what you expect income-wise from working for pay in retirement. Then ask yourself this question for each assumption: What if things don’t go according to plan?

If you’re not sure about that, then now is when you still have some time to plan for the unexpected. You can’t control if you are downsized next year, or if you have a serious illness three years from now. But you can commit to finding a way to save more now, to give you flexibility if the unexpected becomes your reality.

It is fantastic to make plans and to work toward those plans. But the best plans are stress-tested to make sure they have a high probability of success, no matter what curveballs come your way.