As retirement draws closer, many people start to realize that things might not unfold quite as they expected. While you might have planned to work until 65 or longer, life has a way of throwing curveballs.
Health issues, job loss, or even being forced into early retirement due to unforeseen circumstances can push you to step away from work much sooner than planned. In her recent blog post, financial expert Suze Orman stresses the importance of stress-testing your retirement plan to make sure you're ready for the unexpected.
Don't Miss:
- If You're Age 35, 50, or 60: Here’s How Much You Should Have Saved Vs. Invested By Now
- The average American couple has saved this much money for retirement — How do you compare?
According to the Employee Benefit Research Institute, 50% of retirees end up retiring earlier than expected, often due to health problems or job loss. Orman suggests thinking about how your retirement would look if you had to leave the workforce at 62 instead of the traditional age of 65.
Would you be able to find part-time work to cover some income? Could you still delay claiming Social Security benefits? And importantly, would your mortgage be paid off by then? These are key questions Orman recommends asking yourself to see how well your retirement plan could handle a surprise early exit from the workforce.
Another issue many retirees face is unexpected expenses. Life happens: a car breaks down, the roof needs replacing, medical bills pile up, or insurance premiums go up. According to a 2022 survey from AARP, nearly 20% of people aged 50 and older have faced unexpected medical expenses that have taken a serious toll on their finances.
Orman advises having an emergency fund big enough to cover at least eight to 12 months of living expenses. This is much more than the typical three months of savings many people have, which experts say isn't enough for a comfortable retirement.
What's great about stress-testing your retirement plan is that it helps you identify potential weaknesses before they become real problems. Catching these gaps early gives you time to take action and adjust your plan.
For example, if you're worried about retiring earlier than expected, Orman recommends saving more now. Starting in 2025, there's a new rule that lets people between 60 and 63 contribute up to $34,750 to their 401(k), an increase from the previous limit of $31,000 for those aged 50-59.
See Also: The average 401(k) balance soars to a record-breaking high – Here's how to know if your nest egg is keeping pace.
This change, reported by the IRS, is designed to help older workers save more for retirement in the final stretch.
Another way to free up money for savings is by reducing your expenses. The Center for Retirement Research's 2023 National Retirement Risk Index found that 50% of Americans are at risk of not having enough saved for retirement.
Cutting back on things like housing costs or transportation can make a big difference. Approximately 51% of retirees aged 50 and older are choosing to downsize their homes to lower living costs and increase their savings, as per studies from Kiplinger.
Read Next:
- Many are surprised by Mark Cuban's advice for lotto winners: Cash or annuity?
- Many are using retirement income calculators to check if they’re on pace — here’s a breakdown on what’s behind this formula.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
