We like to think that if we plan and save throughout our working lives, a secure retirement is within reach. But retirement often happens unexpectedly. A lay off, health problem, or the illness of a relative can derail retirement plans in an instant.
Few people make it to age 40 without a sudden event shocking their finances. A new survey of 1,200 adults between ages 40 and 79 found that 57 percent had already experienced a major life crisis such as a job loss (18 percent), divorce (29 percent), death of a spouse or life partner (10 percent), a serious illness or long-term disability for you or a spouse (24 percent), or the illness or disability of a child (7 percent). Only about 43 percent of those surveyed made it to middle age or older unscathed, AARP Financial Inc. and Boston Research Group found.
The emotional toll of any of these events can be devastating. So can the financial toll. “Life crises are the perfect storms of personal finance— where the need for consequential and frequently urgent financial decisions meets an emotional hurricane,” says Richard Hisey, president of AARP Financial Inc. Unexpected job loss or a serious illness took the most obvious financial toll in the survey. About half of those who experienced job loss said they were unprepared to deal with the financial consequences.
The number of seniors who need or want to work during the traditional retirement years is rapidly growing. About 433,000 unemployed Americans age 65 and older were actively seeking employment in February, more than twice as many as in November 2007, just before the recession began. Another 1.3 million adults age 55 to 64 were unemployed. “This is a daunting economy for older people. A lot of older people are coming to see us that are scared or bewildered,” says Cynthia Metzler, president and CEO of Experience Works, a nonprofit organization that helps older people retrain for new jobs. “We have people who are in their 80s who are taking on new jobs.”
Baby boomers need to find a way to take back control of their retirement plans by preparing for the current job situation and creating a back up plan while still employed in case one of these unforeseen events should threaten retirement plans. Last year the Planning to Retire blog told 7 personal stores of unplanned retirement including a telecommunications manager forced into early retirement, an occupational therapist who scaled back her work hours to help care for her mother, and a 57-year-old guest lecturer who became unable to work due to Alzheimer's disease. Also, check out these 4 tips for getting an unexpected retirement back on track.