Being forced into early retirement can be a major financial and psychological blow. Photo: Flickr user Clemens v. Vogelsang.

If you love what you do, you may want to work to a ripe old age. Unfortunately, wanting to continue working at your job is no guarantee that you'll be able to. Whether it's because of your own health, the need to care for a family member, corporate downsizing, or any number of reasons, the older you get, the tougher it is to stay working.

No matter what circumstance causes it, if you find yourself forcibly retired ahead of your planned retirement age, it can be a scary situation. It's doubly scary if your retirement savings plan is based on your reaching a target age well above the age at which you actually leave the workforce, in which case you might find yourself without a job and without sufficient savings to see you through retirement.

Could you be forced into a surprise early retirement?
You may well make it through to your planned retirement age without being forced to leave the workforce. The problem is that you can't know in advance whether or not you will. But the later your planned retirement date, the higher the chips are stacked against you.

The chart below shows the U.S. civilian labor force participation rate by age group as of December 2014. It indicates that the portion of people working starts to tail off around age 50, with participation rapidly falling when people are in their mid to late 50s and older.

Chart by author based on data from the U.S. Bureau of Labor Statistics. 

The Social Security full retirement age is increasing to 67 for people born in 1960 or later. If your plan is to wait for full Social Security benefits before retiring, then you're putting yourself in the danger zone of a substantially lower participation rate.

You can protect yourself against that outcome
You may not be able to keep the job you're in until your planned retirement age, but you can protect yourself from some of the biggest financial consequences of an unexpected early retirement. One of the best ways to do that is to plan your retirement investments as though you were retiring a few years before the age you really plan to retire.

That way, if you find yourself out of work ahead of schedule, you'll have more options. With enough money saved, you can:

  • Take more time to find a good replacement job, rather than accepting the first one that comes along so you can pay the bills.
  • Accept a lower-paying job that you truly enjoy, rather than taking a higher-paying job that you may not like as much.
  • "Buy" yourself a job via a franchise, your own start-up, or independent contracting work.
  • Comfortably take that early retirement and pursue the next adventure that life offers you.

Those options are only feasible if you're far along enough in your retirement savings plan when you're forced into retirement.

How to adjust your plans
If you've been saving based on your original planned retirement date but want to get to the point where you'll be ready sooner, there are three main things you can adjust:

  • How much you save
  • What rate of return you earn on your investments
  • What type of retirement lifestyle you want your portfolio to provide

For instance, from a lifestyle perspective, if you're willing to downsize your living arrangements once your kids are independent, you can cut your housing costs substantially. That will help the money you have saved go a lot further.

And although seeking a higher rate of return tends to expose you to more risk, the stock market has delivered returns in the neighborhood of 9% to 10% over the long run. If you're willing to accept higher volatility and invest for the next couple of decades, then a higher stock concentration could give your portfolio the extra boost it needs to make you retirement-ready ahead of schedule.

And finally, saving a bit more can accelerate your nest egg's growth. The table below shows how much an additional $100 per month can add up to over time based on the rate of return you achieve and the time you have left in your new, adjusted plan.

Years to GrowWhat $100/Month Would Grow to, Assuming...
10% Annual Returns8% Annual Returns6% Annual Returns4% Annual Returns
20 $75,937 $58,902 $46,204 $36,677
15 $41,447 $34,604 $29,082 $24,609
10 $20,484 $18,295 $16,388 $14,725
5 $7,744 $7,348 $6,977 $6,630

Source: Author's calculations.

What happens if you're wrong?
If you save as though you could be forced to retire early, and it turns out you're wrong, then you can always stop saving once your nest egg is where you need it to be. That gives you more flexibility with your income as you get closer to retirement -- and it might allow you to live a fuller retirement than you were originally planning.

On the flip side, if you save as though you'll be able to work until your planned retirement age, and it turns out you're wrong, then your options are much more limited, and you may find yourself scrambling to find work at a time in your life when your experience and/or health may actually work against you.

If you save for retirement as though you will leave the workforce earlier than you'd like, then your nest egg can better support you during your retirement -- whether that's an early retirement or retirement on your own terms.