Getting retirement-ready today

There have been many studies illustrating that a large percentage of folks want to continue working beyond a traditional retirement age. You may be one of them. But whether you plan to keep working for financial reasons or because you enjoy your career and want to keep contributing in the marketplace, it is crucial that you become retirement-ready.

As a financial advisor with more than 20 years' experience helping people prepare for and transition into retirement, I've seen a number of things that have pushed people into retirement earlier than they'd originally planned.


Senior worker
Reza Estakhrian | Getty Images

Here are four reasons you need to prepare for retirement, whether or not you ever expect to completely stop working.

1. Your health forces you to retire. While some health issues creep up due to poor lifestyle choices, such as smoking, unexpected illnesses can strike even the healthiest of folks. Whether it's cancer, multiple sclerosis or Parkinson's, there is no guarantee that you'll remain healthy.

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When a serious health problem strikes, the choice to continue working may be taken from you. You may lack the health to go into the office each day or even to concentrate on your career.

Countless studies have shown that declining health is one of the top reasons people retire earlier than planned.

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2. You need to care for a loved one. Maybe you're fortunate and your own health stays great, but you have a spouse or other loved one who requires your care.

It's very common for a person to retire ahead of schedule in order to care for and spend time with an ailing spouse. A close friend of mine unexpectedly retired in his mid-50s so he could be present for his wife's final years as she battled cancer. His early retirement was not forced upon him as it would have been with his own health issue, but it was still a choice that he hadn't really planned for.

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There are also many who choose to retire so that they can help take care of their grandchildren. With today's economy and the meteoric rise in the numbers of single parents, many young families have it tougher than their parents did. Young parents often require the help and support of a grandparent. It's increasingly common for older people to retire ahead of schedule so they can watch their children's children during the day.

Familial responsibility cuts the other way, as well. The need to care for an aging parent is also a major motivation for early retirement. Paying for extended care is sometimes so costly that folks have to leave the workforce and take on the job of caregiver themselves.

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3. You lose your job. The work environment is not what it was 20 years ago, and jobs just aren't as secure as they were in the past. A corporate reorganization or relocation could result in you losing your job earlier than you expected.

Many people are pushed into retirement well before they would like, as the employment landscape changes. Unfortunately, finding new work isn't always easy when you are in your 60s or 70s.

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4. Your passion for work wanes. Some people continue to enjoy their careers well into their 70s and 80s, but for many, work becomes less exciting as the years pass. People who vowed never to retire when they were in their 40s could certainly have a change of heart by their 60s.

A shift in the work environment can also cause a decline in one's passion for a job. New technologies, while reducing mundane tasks, can add unfamiliar new challenges that aren't always enjoyable.

"How do you become retirement-ready? Start with the basics: Save the maximum in your company savings plan, get your home paid off and stay out of debt."

There could also be an unwelcome change in management philosophy. Some older workers don't adapt well when a fresh business school graduate comes in with new processes and procedures for things the older worker has been doing quite well for decades.

I can't tell you how many times I've met with clients who had planned on working several more years but decided to retire early because they couldn't stand their new bosses.

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The retirement lifestyle certainly isn't for everyone, and there are many people who would love to keep working until their last days. The reality is, however, that many folks just won't be able to work that long.

According to the Employee Benefit Research Institute (EBRI), a full 47 percent of Americans who retired in 2013 did so unexpectedly, with most of these early retirements due to health and disability issues. It's an unfortunate fact of life that retirement is forced on many people earlier than they had planned, which is why it's so important to be prepared when the unexpected happens.

How do you become retirement-ready? Start with the basics. Debt is the biggest detriment to financial independence. You can always stretch a dollar, just so long as you have that dollar to spend. But debt robs you of your freedom.

Steps to saving

Steps I recommend to people over age 40 include paying extra on the mortgage and getting the house paid off by the time they reach retirement age. Bite the bullet, tighten your belt, and pay off the credit cards. It's pretty simple: You cannot look at debt in your 50s the same way you did in your 30s or even your 40s. You've got to focus on limiting outflow every bit as much, or more, as inflow.

Next, save the maximum in your company's savings plan. Many conscientious savers put the maximum ($17,500 for 401(k) plan participants) away in 2014, but don't forget that if you're age 50 or older, you have access to the "catch-up contribution," which gives you the option of putting away an additional $5,500. If you end up working until age 65 or beyond, that's great! But even five or 10 extra years of utilizing the catch-up can make a big difference down the road.

Lastly, I talk about goals—but not just financial ones—to clients in just about every meeting. Too many people put money away without having a clear idea of what they want their retirement to look like.

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Goals change over time. This means your preparation needs to change as well. Visualizing your retirement gives you the opportunity to look at things from more than just a financial perspective. It's a minor but important distinction to envision yourself as a retired person and not merely see your current self living on the money you're saving now.

Those are two very different people. Imagining your future self is a huge motivator that helps you to hone in on the task at hand, which is to save money, pay down debt and prepare for the unexpected.

—By Scott Hanson, special to CNBC.com. Scott Hanson, a certified financial planner, is a senior partner at Hanson McClain Advisors.