Retirement Hacks: You never know what might crash your retirement. How to create a ‘Plan B.’ 

The markets are acting up, 401(k) balances are jumping up and falling down, careers are changing (or ending, for some) and what society deems the proper retirement age is increasing across the globe. With all of that, retirement plans are best left a bit flexible. 

One of the first contingencies to have in place is an emergency savings account, or an account with easily accessible, liquid assets to turn to before dipping into retirement savings. For most Americans, advisers suggest having somewhere between three and six months’ worth of living expenses, but near- and current retirees may want to have more than that — even as much as one years’ equivalent.

The recent banking crisis might have some people worried about parking their savings in these accounts, but customers at FDIC-insured banks are guaranteed to have $250,000 protected per person at each financial institution. 

See: So much of retirement planning is wishful thinking — what I’ve learned after 3 years of actually being retired

The reason is simple: when markets are volatile, it is best to leave retirement accounts alone so that they have time to rebound. The more money that is withdrawn when balances are dropping as a result of market volatility, the less money there is to grow upon itself, or compound, when the markets tick upward. This is known as sequence of return risk. 

Another strategy for backup plans: try multiple scenarios when deciding how much to save for retirement, or how much to spend in retirement. While there is no one magic number to dictate how much a person needs in retirement, there are a handful of other important numbers, such as expected expenses in retirement (including healthcare), inflation, all sources of income and so on. 

Create a financial plan that uses the factors you anticipate, or work with a financial planner who could do that for you, but try a few other calculations that are more conservative, just in case there’s a point in your future when you need to pull back on spending because of loss of income, or surprise costs. A financial planner can also show possibilities of an investment account’s “success” based on varying rates of return and inflation. 

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As for retirement income, having a plan in place for earning more money in old age is a great way to bounce back if the unexpected occurs. Sometimes, retirees have to go back into the workforce, or take on some part-time or gig work to bring in a little extra cash to make ends meet. Retire when it’s right to do so, but stay relevant with career or industry news and skills, and keep in touch with a network of people who could point you to a job if need be. 

Lastly, have a Plan B, and maybe a Plan C, for when you’ll actually retire. Governments across the world are revisiting what age their workers should retire, and considering increases. French President Emmanuel Macron recently pushed forward legislation to increase the official retirement age gradually from 62 to 64, a move that was met with protests in the streets. The U.K. is also in the midst of raising the official retirement age for its pension system. 

Also see: At 55 years old, I will have worked for 30 years — what are the pros and cons of retiring at that age? 

The U.S. doesn’t have an official retirement age, but politicians have mentioned increasing the Full Retirement Age linked to Social Security benefits (it is currently 67 years old for anyone born in 1960 or after). Doing so in the U.S. could lead to lower benefit checks for people who retire earlier than their FRA. 

Having a year in mind for when to retire is important, as it gives a concrete time frame for how long someone has to save for their old age. But workers should consider the possibility of retiring sooner than they hoped, because of lost work, a medical issue or having to care for someone else during pivotal working years. Having a plan for what to do if early retirement was necessary will not only relieve potential financial burdens, but also bring some peace of mind during a stressful time.