Many people plan to work through their 60s, easing out of employment on their own terms. Reality check: Your retirement date can arrive abruptly and a lot quicker than you planned. Nearly 60% of retirees stopped working sooner than anticipated, according to a Transamerica Retirement Survey of 10,000 seniors. The average age of retirement in the US is 62, and retirement often is triggered by declining health…the need to care for a sick parent or spouse…layoffs…mandatory retirement…or AI-driven job shifts.
Forced early retirement can upturn even careful plans. “You have less time to save and more time you must live off your nest egg,” warns financial planner Victoria Larson, RCIP. “But it doesn’t mean you have to lose control of what comes next.”
Here are Larson’s strategies for protecting yourself and making sure your assets can last a lifetime even if an early retirement is unexpected…
Scrutinize the severance package
When offered, these buyouts can provide valuable financial breathing room. While many are negotiable to some extent, they often are complicated. Best: Avoid taking a lump sum, which can push you in a higher tax bracket. Monthly payments allow you to split your severance income over two or more calendar years and lower your IRS bill. If you aren’t eligible for Medicare yet, access to an employer health insurance plan might be the most valuable item to negotiate.
Nail down your health insurance until age 65.
Being out of a job often means being left without coverage until you’re eligible for Medicare. Three options…
COBRA
If you worked for a company with 20 or more employees, federal law allows you to continue your existing health insurance for up to 18 months—but you have to pay for it. If you lose your job within 18 months of when you will turn 65, you can keep COBRA for a covered spouse and dependent children for up to three years even if you go on Medicare yourself. COBRA can be expensive, but depending on your situation, it may be your best option.
Your spouse’s employer-sponsored insurance
I’ve had clients whose spouses went back to work just so the couple could get health-care coverage, says Larson.
ACA insurance
If you lose your job, you can buy coverage through federal and state-run health insurance marketplaces in a special 60-day enrollment period that starts on the last day of your employer-based health insurance. Without a job, you may qualify for available subsidies if your income is less than 400% over poverty levels (e.g., for 2026, that is $128,600 for a family of four).
Make a smart decision about Social Security
The impulse to claim Social Security benefits right away is strong, but for many, this is an expensive mistake. Reason: Most people’s objective should be to maximize lifetime payouts. If you claim as early as age 62, you reduce your annual Social Security benefits by 30% forever…automatic inflation increases are on a smaller base…and the survivor benefits your spouse could get after you die also will be lower. For couples: If you really need the income from Social Security immediately, consider having the lower-earning spouse file for his/her benefits early so the higher earner’s benefit can continue to grow.
Consider strategic part-time work
Let go of the idea of that you need to replicate your prior position or wages. Taking any kind of job gets you out of the house and can help bridge the financial gap until your planned retirement date. Even if the salary doesn’t cover all your expenses, part-time income is useful in reducing withdrawals from retirement accounts and delaying claiming Social Security benefits.
Adjust your decumulation plan
Forced early retirement often means making prudent adjustments to spending down your savings, not radically changing your plan.
Step #1: Add up your annual income from sources such as Social Security, pensions, annuities, part-time work and retirement-account withdrawals.
Step #2: Compare this figure to your cash-flow needs.
Step #3: If meeting your long-term needs is no longer sustainable, look at tradeoffs in your annual spending. Example: I worked with a couple who owned a home with a large mortgage in Sarasota, Florida. The husband was forced to retire earlier than planned. We re-ran the numbers, and they realized they could maintain their daily lifestyle as long as their stock portfolio didn’t suffer through a bear market in the first five years of retirement. But rather than take that chance, the couple chose to sell their home and downsize to one they could buy with cash outright.
Leave your investment portfolio allocation alone if you already have a reasonable and balanced portfolio of stock and bonds that allows you to sleep at night. Raising your stock allocation and taking greater risks to pump up your returns can backfire if you wind up panicking and selling during market turbulence. The other extreme is also problematic. I had a client who was forced to retire early and moved his entire million-dollar portfolio into low-yielding CDs—but there were better investments to get downside protection without making such big sacrifices in performance such as annuities and alternative investments.
