How to address the financial risks of an early or unexpected retirement

Some Americans retire earlier than they expected, often for reasons outside of their control such as job loss and health issues.

This means spending a lot more time in retirement than anticipated. More years in retirement can be a gift, but can also create an issue with retirement income.

So, what can you do when facing a retirement that might start sooner – and last longer – than expected?


Revisit your retirement plan

If you have a written financial plan, that’s where you’ll start. By revisiting your retirement plan, you will see where you are in comparison to where you thought you would be when leaving the workforce. You will likely have to amend your strategy for your new circumstances.

It can feel daunting to have to make changes to a retirement strategy. When building your retirement plan, it is wise to consider how an early exit from the workforce would affect your strategy. While many people incorporate contingencies for retirement risks like market volatility and inflation, it is less common to account for an early retirement.

Your written plan will help guide you through this situation.

But many Americans don’t have one – only 42% of Americans said they have a written financial plan, according to the 2023 Annual Retirement Study from Allianz Life. If you don’t have a plan in place, now is the time to create one. You’ll need to understand what you want your retirement to look like and how much it will take in retirement income to achieve.


Connect with a financial professional

Finances are personal, so there are no one-size-fits-all strategies. A financial professional will be able to help you determine how to move forward for a successful retirement in your unique situation.

All of the factors to consider – risk mitigation, tax efficiency, and portfolio allocation – may overwhelm you. You may also wonder about exploring other employment for income, employer-sponsored health insurance, or to delay taking Social Security.

The guidance of a financial professional will help you adjust for your new reality. They can help with a holistic view of your finances and overall well-being.


Consider removing some risk from your portfolio

While a certain amount of risk in a retirement portfolio is necessary to allow for your savings to grow, you may want to consider removing some of the risk as you approach retirement or if you retire earlier than expected. This doesn’t mean taking risk completely off the table, but rebalancing to make sure you’re not over-invested in financial vehicles that are susceptible to market volatility.

Adjusting your strategy to mitigate risk could include adding an annuity into your portfolio or moving money into buffered ETFs and other investments that allow for upside potential while limiting potential downside.

Investing involves risk, including possible loss of principal. There is no guarantee the funds will achieve their investment objectives and may not be suitable for all investors.