The unexpected can sabotage the best-laid retirement plans

Advisers may have a sense on how to prepare for a retirement that’s right on time, but an unexpected retirement due to illness or layoff can shake even the most stable plans.
That was just one of the findings from the research of Courtney C. Coile, a faculty director at Wellesley College and a presenter at InvestmentNews’ Retirement Income Summit in Chicago on Tuesday afternoon.
Her panel, “Planning For and Dealing With Unplanned Retirement,” featured research revealing that clients who lose their jobs because of layoffs, health problems or family responsibilities face an uphill battle to find new work and to keep their retirement on track.
Men and women 50 to 69 who experience health shocks such as a heart attack, stroke or cancer have an increased chance of leaving the work force earlier than anticipated. Men have a 35% chance of retiring early because of those health conditions, while women have a 29% probability, according to Ms. Coile’s research.
Results are just as debilitating for layoffs: On average, people who lose their jobs in their 50s stand only a 55% to 60% chance of being employed two years later, and on average, earnings will be 25% to 30% less than before, Ms. Coile said.
As difficult as such a situation is for the client, advisers also find themselves scrambling for contingency plans. Panelist Sheryl Garrett, founder of The Garrett Planning Network Inc., recalled a situation in which a 43-year-old couple that was well-insured and seemingly financially sound ran into problems when the husband became diagnosed with a degenerative disease that threatened the couple’s assets.
Suddenly, the family was looking at the prospect of having only enough money until 65, at which point the husband’s disability insurance would run out. The man also only had mostly term insurance with no conversion features and very little permanent coverage.
“We had to manage their cash flow from 43 to 65 so that they could set aside money to save $2,000 a month,” Ms. Garrett said. “It was the only nest egg in addition to what they accumulated and the only thing that would carry them into the future if he didn’t die.” The situation came up close to a decade ago, and the husband is still alive, she added.
Surprises aside, the one thing clients can do is to have ample cash reserves and have sufficient insurance coverage, including disability, Ms. Garrett said.
For advisers, building a network of experts who can help with planning specialties — including special-needs attorneys, medical-billing experts and specialists in long-term-care insurance — can provide a valuable reference for when clients encounter these surprises, said panelist Edward W. Gjertsen II, vice president of Mack Investment Securities Inc.
“The only time you’re going to suddenly discover this [circle of professionals] is when you have a client in need and you start reaching out,” he said.
Mr. Gjertsen’s circle of experts includes a medical-billing specialist who deals with clients’ insurers when medical costs don’t quite add up. Having her help takes a load off of him and his clients who require her services.
“In an end-of-life scenario, that’s the last thing you want to worry about,” Mr. Gjertsen added. “That’s my go-to person; she creates lots of peace and calm.”