Planning to Work Until Age 70 or Older? Don't Count on It

If you're like most people, you probably have a plan for when you want to retire -- and that plan may be to work as long as possible. Almost four in 10 workers responding to a recent Employee Benefit Research Institute survey revealed they planned to keep working until they were at least 70 years old, with financial reasons cited as the top justification for working so long.

Unfortunately, the percentage of workers who actually retire at 70 or older is shockingly low, and is about 10 times lower than the number of workers who had to retire before age 60, which few workers plan on doing.

If you're forced out of the workforce before anticipated, you'll need to respond in the right way to salvage your retirement. Read on to find out how likely it is you'll have to leave work early, and what to do if this happens to you. 

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You're almost definitely not going to be able to work past 70

According to ERBI's survey, while 39% of workers expected to retire after turning 70, just 4% of current retirees report they were able to work that long. By contrast, while only 9% of workers indicated they'd retire before reaching age 60, 39% of current retirees left the work force before hitting their 60th birthday. 

Those who retired early largely did so out of necessity. More than four in 10 workers who left the workforce earlier than planned did so because of health issues while 26% retired because their companies reorganized. Just a quarter of the early retirees did so because they could afford to. 

The chances of health issues forcing you out of the workforce are substantial, and real unemployment rates for older workers are higher than unemployment rates for the general population -- so finding new work if you're laid off could be difficult.

What should you do if you're forced to retire early?

If you're forced out of the workplace early, chances are good your nest egg isn't going to be big enough to support you through retirement. Unfortunately, your circumstances may also force you to claim Social Security benefits early, which will reduce the monthly Social Security benefits you receive. 

So, what should you do if you find yourself in this situation?

• Figure out if you can, or should, claim Social Security: While many people assume you should claim benefits as soon as you're retired, delaying could increase your income. Calculate your break-even point for delaying and, if it makes sense, see if you can live off a spouse's income or survive on savings for a while -- as long as you won't draw down your savings too quickly. You should also see if you're eligible to claim benefits on a spouse's work record if you're widowed, divorced, or your spouse is retired already.
• Determine how much you can safely withdraw from your nest egg: You'll have to be especially careful not to withdraw too much from saving since your nest egg must last longer if you retire early. There are different ways to calculate income in retirement, including determining a set percentage of income to withdraw during your first year after leaving work.
• Make a budget: You'll need to make a budget based on income you can safely withdraw from savings, as well as any Social Security benefits you'll receive. This will indicate whether your lifestyle is affordable or whether drastic changes need to be made.
• Create a plan for healthcare: One of the biggest downsides of early retirement is you may lose employer health insurance coverage before you become eligible for Medicare, or you may not be able to afford out-of-pocket costs incurred while on Medicare. You should explore ways to save on healthcare, including talking with your doctor about cost-cutting measures.
• Downsize and cut spending: For most seniors forced into early retirement, cuts must be made. This could include downsizing your house, moving to a lower cost of living area, getting rid of a vehicle in your household, or cutting off financial support of your grown kids. Take action immediately to downsize when forced to retire early with a nest egg that's too small, as you don't want to spend too much money early on and be left with too little in your older years.

Of course, younger workers should also consider that their plans to work until age 70 may not work out. This should encourage those who have time to save as much as possible, so if they're forced out of the workforce early it won't be the end of their dreams for retirement.

Be prepared for retirement plans not to work out

It's never fun to have plans that don't come to fruition -- especially about something as important as retirement. But, by reacting right away when you're forced out of the workforce early, you'll hopefully be able to stave off financial disaster and still have a reasonably comfortable retirement if you leave the working world before you're ready.