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Your Retirement Will Probably Start Earlier Than You Want

NEW YORK (TheStreet) — Few people want to consider the possibility of an unexpected early retirement, but a job loss or serious health issue can sideline you way before you expected it in your working years.

"Many Americans are faced with unexpected early retirement," says Joe Jennings, a financial adviser with PNC Bank. "More than half of those 70 and under who have already left the workforce did so earlier than they had planned. Factoring in the unexpected is part of a strategic retirement plan."

Reasons for retiring before you're ready vary. 

According to the Employee Benefit Research Institute, 63% of employees who leave the workforce early do so because of a health problem or disability; 23% depart over a downsizing issue or en employer shuttering its doors or business closure; and 18% leave because they have to care for a family member.

Your retirement savings goals likely won't be met if you fall into an unexpected retirement. Your income will suffer by not working, and in the case of a health issue, valuable financial assets can be swallowed up that are needed to pay for good medical care — even with decent health insurance.

Financial advisers generally agree workers will need to replace 80% of their full-time income in retirement, but that task becomes much more difficult, if not impossible, if you shave five to 10 years off your expected working life.

While not appealing, an unexpected early retirement isn't an official disaster — especially if you plan ahead and redirect your household budget and spending to accommodate the lost income you will likely lose by bowing out of the workforce early.

Here are a few tips that can help fill in the gaps:

Take inventory. How much cash do you have for retirement right now? Find out here how much you'll get from Social Security, then check your 401(k) or other employee-sponsored retirement plan and company pension, if you have one. Compare what you have now with what you'll need to live on in retirement. If you fall short you'll have to readjust your spending plan in retirement or go back to work (if you're physically able to and can find a job) to make up for the shortfall.

Create a cash reserve — starting now. The best defense against an early withdrawal from the workplace is to build a cash reserve of up to six months' worth of expenses. That may buy you enough time to survive a health issue or find a new job. At the very least, it will buy you enough time to figure out a plan.

Delay taking Social Security as long as possible. Instead of cashing out your Social Security funds at age 62.5, wait until 70.5, when your payout will be the highest possible. Try to live on your retirement savings in your 60s, or work part-time to add more cash to the household budget.

Look into long-term care insurance. You can save money by paying for long-term care insurance now instead of paying more for it later. The cost of services such as in-home health care rise annually, but if you buy now, you can lock in a lower price for long-term care and save money for down the road.

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