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

Are you currently working and retirement is on the horizon? Things might not work out quite as you think. It’s important to plan for the possibility of a retirement that starts earlier, and lasts longer, than you expect. Read on for tips to help decrease the financial risk of an early or unexpected retirement.

While many working Americans believe they will retire on their own terms, the reality from those who have already retired paints a different picture. Half of the retired Americans we surveyed* said they retired earlier than expected, the vast majority doing so for reasons outside of their control, including job loss and health care issues.

This means that people could end up spending a lot more time in retirement than they had planned to, which can create an issue with their retirement income. Without a steady stream of guaranteed income in retirement to cover fixed costs, it’s likely that your money will run out sooner than you planned.

The easy answer to this is to work longer in retirement. In fact, most non-retirees think they will. But the reality is, not many current retirees are currently working at least part time, suggesting that pre-retirees shouldn’t count on that option.   

So, if working longer in retirement isn’t the answer, what can people do when they are planning for a retirement that might start sooner – and last longer – than they expect? Here are three tips that can help pre- and near-retirees feel more confident, regardless of when their retirement begins:

1

Address guaranteed income

One of the best ways that non-retirees – particularly those who are closer to retirement – can help address risks associated with early or unexpected retirement is to add a source of guaranteed retirement income, such as an annuity, to their strategy. Addressing retirement income early in the planning process can be a smart way to help prepare for potential surprises in your retirement strategy. Having a strategy that covers basic expenses can help build confidence to address risks that come your way, no matter when you have to put your plan into action.

2

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 that risk if you’re at all concerned about an unexpected retirement. 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 could help bring more reassurance. In addition, you may want to consider innovative products like Index Variable Annuities that allow for more upside potential than traditional annuities, but also provide the opportunity for varying levels of protection from down markets.

3

Connect with a financial professional

Developing an effective retirement savings plan can be extremely challenging, even without professional help. With so many factors to consider – risk mitigation, tax efficiency, portfolio allocation – feeling completely prepared for retirement is a tall order for the average American. Add in the fact that many retirements start earlier than expected, and you could have a recipe for trouble. A good way to help address these retirement risks is to meet with a financial professional so you can get a second opinion on your strategy and help ensure you have all of the bases covered as early as possible.

*Allianz Life conducted an online survey, the 2020 Retirement Risk Readiness Study, in January 2020 with a nationally representative sample of 1,000 individuals age 25+ in the contiguous U.S. with an annual household income of $50k+ (single) / $75k+ (married/partnered) OR investable assets of $150k.


Annuity guarantees are backed by the issuing insurance company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions. Some guarantees are provided through built-in or optional riders that may be available at an additional cost.

For more complete information about variable annuities and any available variable options, call Allianz Life Financial Services, LLC at 800.624.0197 for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about the variable and index-linked annuity and variable options, which your clients should carefully consider. Encourage your clients to read the prospectuses thoroughly before sending money.

Products are issued by Allianz Life Insurance Company of North America and variable products are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297.