And 97% of the financial advisers surveyed agreed with the statement that retirement involved more surprises and challenges than their clients expected. The biggest financial shocks for retirees were cost-of-living increases (29%), having to provide financial assistance for family or friends (26%) and the declining value of investments (26%), the survey found.

“When it comes to financial planning, you can plan for the perfect scenario, but you also need to plan for the unexpected. If you haven’t at least thought about Plan B or Plan C, you don’t really have a comprehensive financial plan in place,” said Michael Berkhahn, vice president of Graham Capital Wealth Management.

“Many people think the worst is never going to happen to them. They don’t want to think about — let alone plan for — the worst-case scenario,” Berkhahn said.

“It’s not very different than talking about bear markets. That happens, and you should be prepared for that to happen often,” said Mark Cortazzo, a senior vice president and financial adviser with the Wealth Enhancement Group. “People underestimate the low probability of high-impact events. But really — expect the unexpected.”

The average retirement age in the U.S. is 61, according to a 2022 Gallup survey. But the target retirement age among people who have not yet retired is 66, the survey found.

So what do you do if you’re one of the 40% of workers who face unexpected retirement?

First, take a moment and breathe.

“It’s very emotional to be displaced [or] let go [from a job]. People feel they don’t have control. People have knee-jerk reactions that can get them in trouble,” Cortazzo said.

Berkhahn acknowledged the emotional toll of a layoff or forced retirement. “Take the weekend, sure,” he said. “But then get to thinking about how we move on from here. Schedule a visit with your financial adviser as soon as possible.”

He recommends reviewing the past 18 to 24 months of your spending to get a realistic view of your monthly expenses. You might spend more than you realize, since some bills like local taxes or car insurance might be paid quarterly or every half-year, he noted.

Another topic to broach with your financial adviser is how to rebalance your investments to match your new retirement status, Berkhahn said.

“Because of an unexpected retirement, you may not be invested appropriately now. Ask yourself if you’re properly invested in your 401(k) based on the new situation. Do you need to be more conservative?” he said.

Next, consider your Social Security strategy, Berkhahn said.

“The No. 1 question we get is, Should I take my Social Security now? If you take Social Security early, remember that if you go back to work, there are earnings limits, and the government takes a portion of your earnings beyond that. That could affect whether you decide to get a part-time job,” Berkhahn said.

If you are under full retirement age for the entire year, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2023, that limit is $21,240, according to the Social Security Administration.

Full retirement age is 67 for anyone born in 1960 or later.

But working part time can help cover healthcare costs if you were forced into retirement before age 65, when you become eligible for Medicare, said Conor Manning, a financial adviser with Great Waters Financial.

And if you’re younger than 59½, be careful about taking any distributions from retirement accounts, because withdrawals would be subject to income taxes and a 10% penalty, Manning cautioned.

“Stay focused on the things you can control. What you spend is the biggest factor you can control,” Manning said. “Living below your means or living within certain lanes — that can help you know what you need to survive.”

But really, the best strategy for an unexpected retirement is to be prepared for the unexpected.

“If you wait until the unexpected thing happens, you’re already behind the eight ball. Having some of your ducks in a row in the first place can help you get back on track,” Manning said.

“Having emergency savings money of six months or more of expenses set aside gives you room to breathe,” he added. “Most people just need a minute to grieve, be frustrated and be disappointed, to digest. If you don’t have any margin — that’s going to put you in a really tough spot.”

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