section 1 - The American College Online Learning Center

a. Forced retirement riskb. Reemployment riskc. Public policy riskd. Loss-of-spouse riske. Unexpected financial responsibility riskf. Financial elder abuse risk2. Forced retirement risk is the possibility that work will end prematurely because of poorhealth, care-giving responsibilities, dismissal by the employer, lack of job satisfaction orfor other reasons. Your clients should be concerned about retiring earlier than plannedfor a variety of reasons:a. This is likely to lead to inadequate retirement income because the client has notgarnered the necessary resources to fund retirement needs.b. Example: Peggy plans to work until age 65, but her long time employer suddenlycloses her office when she is 61. (This scenario illustrates business continuityrisk.) There are very few employers needing her skills in the area, and she isunable to find suitable employment. Not only are her plans to accumulate morefunds for retirement ambushed, but she may not be able to receive or afford healthcare coverage until she is eligible for Medicare.c. Planning Point: Over 40 percent of clients retire earlier than expected.d. Planning Point: Clients may have little or no warning to prepare them for forcedretirement.3. Forced retirement risk can be minimized in the following ways:a. Suggest that the client save for graded levels of retirement security at differentages. In other words, instead of thinking of the goal for retirement savings tobe X dollars by Y year (the year of projected retirement) think about saving forretirement as providing for a specified standard of living by, for example, ten yearsbefore retirement; a more comfortable standard of living, for example, at 5 yearsbefore retirement; and the desired standard of living at retirement. By setting thesavings program up to meet graded goals, you may encourage the client to saveearlier and to assess what the final years of work will mean to his/her retirement.Most importantly, however, you will have prepared a level of security in case anearly termination occurs. The start of retirement is no longer a “date.” The startof retirement should be thought of as a period (age 60-70), not a date (the Julyafter my 65 th birthday).b. Career management is another solution to the problem of forced retirement risk.The client who chooses to adapt his/her skills and education to current marketneeds and the client who chooses to work for the employer with the greater senseof job security and satisfaction will be better served than the client who does notseek these adaptations to his/her career.c. See if formal or informal phased retirement is possible. A client can plan hisor her career to slow down responsibilities, cut back on clients, or drop theresponsibilities associated with a second job.d. Example: Joe has always been a high school teacher who did landscaping work inthe summer. When he turned 60, he decided to stop the physically demandinglandscaping. This allowed him to continue teaching with summers off until age 67.e. Advise negotiating for golden handshakes and severance pay.f. Example: Maggie, age 61, is thinking of leaving work to take care of her motherwho needs care for an illness, which threatens to linger for several years. Maggieshould investigate whether her employer is willing to offer her a package to leaveemployment (e.g., health insurance and a lump sum payment based on her long5.27