How to Prepare for a Rocky Start to Retirement

2 How to Prepare for a Rocky Start to Retirement Header ImageWhat happens when you have a great retirement plan – only to get caught off-guard with an early retirement? Our client Linda experienced exactly this scenario.

Currently 61, Linda is single and has been in complete control of her finances since her divorce nearly 20 years ago. A client of ours for years, Linda was on track to retire at age 67 with her investment accounts, Social Security, and a deferred annuity to see her through the golden years.

That is, until she was unexpectedly laid off at age 59 – and struggled to find a new job.

Here’s what Linda did as we helped her navigate this challenging situation.

Updating Linda’s savings and investment plan

 When you experience a sudden transition into retirement – or if you find yourself drifting into it earlier than expected – it’s important to get a handle on your long-term plans as soon as possible.

In Linda’s case, a very early start to retirement meant a stop to her savings program – and a need to start relying on her financial resources far earlier than expected. We had to look at Linda’s new income options and her investment accounts in order to adapt.

Because Social Security and other benefits aren’t yet on the table and unemployment is temporary, our first step was to dial down the risk level in Linda’s portfolio and to shop around for possible annuity options.


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We decided that now wasn’t the best time for Linda to buy an annuity, especially because she decided to start a small business that’s grown rapidly. Linda has been working hard to build a virtual assistant service to utilize her decades of experience in administration and to help build new skills and a sustainable income base for the future.

So far, she’s surprised even herself with the results, though the transition hasn’t been easy. She says, “I had to learn tools and systems that I’ve never worked with before, not to mention learn about sales and how to find clients. It’s been an adventure – sometimes a scary one!”

Income strategy: How to do it

Just like Linda experienced, many retirement projections are based on assumptions about your retirement date, and thus on how much you can expect to have saved by a specific point in time.

So, as soon as you see that retirement is inevitable, reconsider the following:

  • Your income sources. You may be eligible for Social Security benefits, disability, or other assistance, or you might be on your own. What income sources can you access, and how much can you reasonably expect to generate per month?
  • Your investment portfolio. How much risk do you have, and how much is your account growing? Can you afford to keep this level of risk given your income needs?
  • Your asset base. Aside from sources of income, consider what assets you have at your disposal. You might not need to tap into them right now, but it’s important to know what’s there.
  • From this information, you can begin to estimate a sustainable income level. If you’ll be drawing on retirement assets, it’s important to run the numbers on what you can expect to receive over the long term.

The key here is to see what options are on the table for you, and to consider how those options align with your personal financial resources, your preferences and needs, and the reality of your life. This is critical to remember: no single answer will solve every problem, and even two people with the same income level and home equity value could have completely different “best” solutions.

 Rethinking Linda’s expenses2 How to Prepare for a Rocky Start to Retirement Info Image

 In making her transition to an early retirement, Linda also had to make some tough decisions. Though her home was nearly paid off, she decided that she would rather sell before she needed to and put the house on the market. She took her time and downsized into a nice but much cheaper condo that she can stay in for decades if she chooses to.

Linda didn’t have any other debts, so she saved her remaining home equity in a taxable investment account. We decided on a very conservative investment strategy for these funds so that Linda can help supplement her business income without dipping into her retirement funds.

As she says, “Even when I don’t use it, just knowing it’s there is a major help.”

 Expenses management: How to do it

 Once you have more clarity on your income options, it’s time to assess your expenses. Some expenses – like those medical bills – might not be so flexible, but others could be.

Three major expense categories to consider:

  • Home and car. Often among the biggest line items in household budget, during times of turmoil they may need to be reconsidered. If you are thinking about downsizing, be sure to take it slow: home in particular can be a very emotional subject, and it can be difficult to be objective about the best course of action.
  • Insurance and medical expenses. Many “involuntary” retirees find themselves retired due to health issues. In this situation in particular, it’s important to learn about and understand your insurance coverage options and to proceed in a way that helps you maintain the coverage that you need at a cost that you can afford.
  • Paying for credit card or other debts on time is very important to your long-term financial health, as it can impact your access to credit and other resources in the future. If you can renegotiate your rates, it might be a good idea to do it now – sometimes all it takes is a phone call, and other times you may want to consider refinancing or consolidating.

From there, you might have many lifestyle expenses that could be adjusted now that you’re no longer in the workforce. If you can, keep track of your expenses for a few months and make a project out of seeing what budget items are no longer needed – and where you might be tempted to overspend.

Far from a time of expenses falling uniformly across the board, retirement can present new budget items. Be sure to stay aware of your spending so that you can steer yourself towards a sustainable budget.

Use the assets at your disposal

In Linda’s case, she had her home, her advisor, her health, and an incredible determination to start a business for the first time in her life. By selling her home, Linda was able to reduce her cost of living and free up capital, and today she is able to cover most of her expenses as a virtual assistant.

“I’ve had to use my savings for certain expenses, which I really didn’t want to do, but it’s much less than I expected – and that gives me more hope for the future.”

If you’re in a similar situation, don’t forget to utilize your own assets – they might be financial, and they could include the people around you and the professionals who can guide you. An unexpectedly early retirement is seldom easy, but it doesn’t have to be all bad news.

Are you ready for the unexpected?

Many of us are at risk for an early retirement, either due to illness, job loss, or other factors. But that doesn’t mean you can’t prepare. Download our free retirement stress test guide today to learn about common retirement risk factors and how to assess your own retirement readiness.

Don’t let the unexpected catch you off guard: download our free guide today and help ensure a more secure financial future!


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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

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Important Disclosures

& Associates Insurance Services or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
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