Planning to keep working in retirement? Your body may have a different plan.

The traditional view of a work-free retirement is fast becoming a relic of prior generations. In the 2022 Retirement Confidence Survey by Employee Benefit Research Institute (EBRI), 70% of workers expected their paychecks to be a source of retirement income. The benefits of continuing to work are clear. You can keep contributing to your retirement account as you delay your retirement contributions. Working longer may also allow you to put off collecting Social Security – which will give you a higher benefit later. Unfortunately, working deep into your retirement years may not be a realistic plan, as the researchers discovered. Your body – or fate – may have a different plan.

Retirees’ experiences different from workers’ expectations

The same EBRI survey asked retirees to weigh in on their experiences with work in retirement. More than three-quarters of retirees (78%) said they weren’t using work as a source of income. Further, 47% of retirees admitted to retiring earlier than expected. Of that group, a large majority linked their early retirement to circumstances outside their control. Specifically:

• 32% retired earlier due to illness
• 33% retired earlier due to corporate downsizing or restructuring
• 13% retired earlier to care for a spouse or family member
• 7% retired earlier because their skills no longer matched their jobs

Here’s the takeaway; A retirement plan that relies on your paycheck may expose you to the worst of financial surprises. As the data indicates, seniors commonly retire earlier than they would like. If that happens to you and you’re not prepared financially, your early retirement could come with a major lifestyle downgrade.

Backup your finances with higher savings contributions

Saving and investing more are often the best moves you can make to protect against an earlier-than-planned retirement. If you have a workplace 401(k), take advantage of high contribution limits and catch-up contributions if you’re eligible. This year, you can contribute up to $20,500 to a 401(k). The IRS additionally allows for $6,500 in catch-up contributions if you turn 50 before year-end. Making use of those catch-up contributions can significantly increase your savings balance at retirement. Say you invest the full catch-up amount of $6,500 annually between the ages of 50 and 65. Assuming your return is a market-average 7%, those contributions will grow to about $160,000. You can also stash more money in a health savings account (HSA) if you’re eligible. For everyone under age 50, 2022 HSA contributions are capped at $3,650 when you have self-only, high-deductible health insurance. If you have family coverage on a high-deductible health plan, your contribution limit is $7,300 for the year. In the year you turn 50, you can add $1,000 to those limits.

Reduce debt and build cash

Reducing high-rate debt and building your cash reserves will also strengthen your finances. You’ll want to pay down your high-rate debt before retiring, anyway. Doing it now frees up cash to fund higher retirement contributions. Ample cash savings gives you the flexibility to manage through all kinds of unexpected circumstances. Say you do get laid off in your late 50s. You could use your cash on hand to pay the bills temporarily as you explore the job market and/or rework your retirement funding plan. Without sufficient cash reserves, your only option may be to start your 401(k) retirement distributions immediately.

Hope for the best and plan for the worst

In personal finance, it’s always smart to consider the worst-case scenario. With respect to retirement, that worst case could be losing your paycheck five or 10 years earlier than you’d planned. Raising your retirement contributions now is usually the best defense against a forced early retirement. Paying down high-rate debt and increasing your cash savings are also smart moves. You’re not likely to regret any of these steps, either. Even if you end up working as long as you’d like, rock-solid finances are always good to have.