This article originally appeared in Forbes.com.
You’re happy in your career. You’re earning enough for now and putting money away for later. You feel productive. You like working. When asked, you say you have no plans to retire until you’re at least 65.
Surprise! Things happen. You could confront health challenges that affect you or your family, lose your job, or simply grow dissatisfied with working. To paraphrase Robert Burns, the best laid plans of mice and men oft go awry. The statistics show you’re likely to retire earlier than you think. According to a study done by the Center for Retirement Research at Boston College, while only 20% of those who plan to retire by 61 retire early, 55% (more than half!) of those planning to work to 66 or later retire earlier than they expected.
Retiring earlier than you anticipate almost certainly means a smaller nest egg. You’ll have both fewer years of savings and fewer years of investment returns on the savings you do have. Those smaller resources will also have to stretch further since you’ll have fewer working years and more retirement years without earned income.
Fewer savings is another risk to add to the ever-growing list of retirement risks you’ve probably already heard about like investment risk (poor returns), inflation risk (your hard-earned and carefully husbanded savings may not buy as much), longevity risk (you may live longer than you expect, stretching your resources even further), and long-term care risk (health issues could require expensive help). Unlike these risks, you can’t insure against an earlier than anticipated retirement.
Your only recourse is a backup retirement plan, one that works with fewer resources and more years of living in retirement. That could mean less ambitious travel, moving to a smaller, less expensive home, or moving to an area with a lower cost of living.
Alternatively, make early retirement a part of your base retirement plan and make sure that base retirement plan works. That is, save enough early enough to be able to afford to retire in your early 60s, even though you plan to retire later. Retiring later then will allow you to expand from your base, adding on extra spending, extra travel, maybe a boat or a golf course membership. Extras.
The experiences of those who have retired before us can provide valuable guidance for our preparations. Stories like the ones in this New York Times article are more compelling than the dry statistics in a research study. Talk to family and friends about their retirement decisions. Focus on the ones who had to or chose to retire earlier than they planned. Why did that happen? How did they adapt?
The big takeaway: if your retirement plans rely on your ability to work until 66 or later, you are likely to be disappointed. You need a backup plan that will work if you can’t work that long because there’s a good chance your backup plan will move to the front of the line.