By Jason Coleman

Imagine you are 59 years old, nearing the apex of a successful career. You have worked hard for 30 or even 40 years and have come into peak earnings. With an increase in earnings has been an increase in responsibility -- perhaps managing larger teams, bigger sales quotas, or the challenge of being the "go-to" for everything that needs to be done. With incomes up, you and your spouse have taken more lavish trips, bought new cars, or moved into a more expensive part of town. In many ways, life is great and things have worked out.

But then something unexpected happens. We often see two trends develop in the background that can conspire to create a retirement different than expected.

First, while the workload ramped up, your age has caught up to you. When you first did a financial plan, working until age 65 or 66 seemed reasonable. With a decade now of intense and demanding work, holding out another five or six years can feel immensely difficult. Often, we hear the phrase "a young man's game" when clients discuss revising retirement age down a few years.

Second, while you were working hard in the organization, the organization may have changed around you. Technology enabled cheap talent to achieve similar results, or successors are now trained up to take over your responsibilities. The company sends out a notice with a buyout offer, or decides a restructuring is necessary and you won't be joining along.

In either case, you ask your adviser what retirement earlier than you had planned looks like. Unfortunately, addressing the challenge now is extremely difficult. For some, the resources are available. For others, it may be tight or even a long shot -- finding a new job or working part time may be the only way. The answer could turn out to be surprising, painful, and discouraging.

The true time to address this potential challenge is not at 60, but 50. With a full decade, time is on your side to leverage good habits into a powerful way of dealing with an unexpected early retirement. In planning for the contingency imagined above, here are a few items worth considering that often don't fit into a "traditional" financial plan.

Avoiding the Wealth Effect Trap

As incomes increase and 401(k)s grow, it is a common for humans to feel wealthier and therefore feel able to spend beyond previously acceptable levels. It plays out in a thousand little ways: eating out more, buying a car a little nicer than the one it replaced, or sending your child to an out-of-state public college just because you can.

Spending as if you're wealthier increases the new normal of your lifestyle. Not only does this make a traditional retirement more difficult, but can make an early retirement feel draconian.

The plan that worked spending $150,000 per year in retirement becomes challenging if you really need $200,000. Retiring before you had planned makes the actions necessary for an unexpected change feel all the more challenging. Reducing spending by 5% to 10% can often be done without much change to lifestyle. Doing so by 25% or 30% is difficult, indeed.

The easiest way to accomplish this is to manage your own behaviors. The easiest way to accomplish this is to bank the increased earnings before they even show up. Be sure to max your pre-tax options, and if possible, contribute after-tax money out of your paycheck, as well. If you are already doing that, then set up an automatic investing plan with your brokerage account to draw money on your payday directly into a taxable account. With each raise, focus on the benefits of creating options for yourself, rather than the bad feeling of not getting to spend it now. If your earnings increase by $50,000 per year starting in your fifties, then you can often stash nearly half a million dollars without realizing it.

Mix of Taxable, Tax Deferred, and Tax Exempt Assets

If retiring at age 66 was the original plan, then often the income stream can feel very seamless. Social Security kicks in. Maybe a pension. The remainder is covered by retirement assets. The taxes feel about normal, with most dollars being taxed as regular income.

For those in the early retirement situation at age 59, you'll often be looking at a gap of six or seven years to get the best value out of Social Security at full retirement age. If the previous decade can be used to increase both your tax deferred and taxable/Roth assets, much more space is created to address tax issues, increase the power of compounding in your qualified accounts, and be accessible at capital gains rate or no tax at all to address any contingencies that come up. Managing to have three to five years of expenses in a taxable or Roth account can go a long way to increasing your planning options during your sixties.

As an example, if you are let go at age 60, and have enough taxable funds to cover three years of withdrawals, then you have the financial space to "harvest gains" at a very low or no tax rate, or convert funds from your IRA to your Roth IRA at a very low tax rate, and avoid a potentially higher tax rate when you are required at age 70 to withdraw these funds. Either strategy could reduce your future tax burden. Those without taxable funds available often have few options when it comes to reducing current and future taxes.

Utilizing Company Plans to the Fullest

Often, when W-2 earnings are peaking, so are tax bills. Unfortunately, many people don't pay close attention to this as the changes year-to-year in your excess return may change little. At the same time, as employees are promoted into upper management, they may have access to new benefits that go unnoticed.

First, companies may offer deferred compensation, which allows employees to take part of their current earnings and pay them out after retirement for a period of years. This avoids a high marginal tax rate in the current year and creates an income stream for several years. Contributing to a deferred compensation plan can often act as a good stop gap for early retirement.

Second, employees are often rewarded with stock options or restricted stock for their work. We often find it most useful for clients to not bucket this with their "paycheck" earnings at all, and simply add or sell and diversify into their current mix. This is often easily achieved and remains "out of sight, out of mind" when it comes to spending.

While all of these strategies are important for early retirees, the most important one is to ensure you are asking your adviser the right questions and understanding not only the retirement scenario, but many types of scenarios and how your current habits and assets will support those. Rather than asking, "Can I retire at 67?" work with your adviser to understand what retirement at various ages would look like, and what resources are necessary to maintain a suitable lifestyle at each of those ages. Preparing for many outcomes in your early 50s will make the unexpected less painful, and provide more peace of mind throughout your last working years.

About the author: Jason Coleman graduated from the University of Notre Dame with a BBA in accounting and a graduate degree from the School for Environment and Sustainability at Michigan. He combines two of his favorite activities: working with people to help them achieve financial their goals and doing so with a focus on sustainable, positive actions and investments. Jason's investment interests include socially responsible investing, tax-efficient and low-cost diversification strategies, and planning for charitable giving. Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss. You should discuss any tax or legal matters with the appropriate professional. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The above situations described are hypothetical in nature. Any opinions are those of Jason Coleman and not necessarily those of Raymond James.