66% of Older Workers Will Experience This Devastating Retirement-Planning Setback

It's a risk that nobody can completely avoid.


As you prepare for retirement, there are loads of factors to consider, and questions you'll need to answer. Chief among them: What age do you plan to retire? How much will you need to have saved by then? And how much do you expect to spend every year after you do retire?

If you want a good shot at a comfortable life in your senior years, it's crucial to have a plan in place long before they arrive. But what happens when life doesn't go according to plan? New research shows that roughly two-thirds of older adults have experienced the same unexpected life change -- and it's one that can drastically affect your  retirement outlook.

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The factor that can jeopardize your entire future

Certain things in life that are largely beyond your control, and one is your ability to work.

Approximately 66% of workers over age 50 have involuntarily left their jobs, according to a new report from the Urban Institute. The most common cause of such job losses were layoffs, but many workers also left their jobs due to health issues, or were forced into retirement sooner than they expected to be.

The financial consequences after those job losses were significant and, for the large majority, lasting. The median household income among these workers before they had to leave their jobs was nearly $94,000 per year. Afterward, it dropped 42% to around $55,000 per year.

While there's no good time to lose your job, it's especially challenging when you're older. If you're just a few years from your planned retirement age, you should be supercharging your savings and putting the finishing touches on your retirement plan, not putting your IRA contributions on hold because you're worried about how you're going to pay the bills. Also, if you don't have an emergency fund that you can use to cover your expenses while you look for another job, you may be forced to tap your retirement funds early -- which will undo some of your hard work. 

Some workers in this position may simply choose to retire early, but that has consequences too. It could mean you won't have enough savings to last through your senior years unless you make hard cutbacks in your spending. Additionally, because it can be more difficult to find a job when you're in your 60s or older, if you eventually run out of money and want to return to work, you may not be able to -- even part time.

Although you may not be able to predict when or if you'll lose your job, there are steps you can take to prepare your finances for the possibility.

Expecting the unexpected

One of the best ways to prepare for a job loss at any age is to build a healthy emergency fund. Many experts suggest you should have enough money in yours to cover three to six months' worth of your general living expenses, but if you're nearing retirement age, it's a good idea to have one that's a little larger. Older workers tend to have more difficulty finding new jobs, so you'll want to be prepared to go at least a few months without a steady income.

It's also wise to start saving early, and to invest as much as you can through your retirement accounts when you're younger so your nest egg will already be fairly robust while you're still years away from your planned retirement age. That way, if you end up leaving the workforce earlier than you anticipated, you'll still have a good amount of cash to cover your needs. Perhaps your savings won't last quite as long as you need them to, but you'll have given yourself a better shot at living comfortably for some time.

Another way to prepare for the worst is to create one or more sources of passive income. Because these strategies typically require a bit of work upfront before the income involved truly becomes passive, it's best to start on this when you're younger, too. Then, if circumstances require it, you'll have that income to keep you afloat.

Saving for retirement is tough enough even when things are going well, but if you suffer a job loss later in life, it could throw off your entire plan. But by taking steps while your finances are relatively stable, you can prepare for any financial calamities that might appear down the road.