Avoiding Forced Unretirement

This is a short post on the sad problem of baby boomers who retire but are being forced by financial problems to return to the workforce.

I came across yet another story about a relatively young retiree being forced to “unretire” because of losses in the stock market and poor planning. This baby boomer has all kinds of problems now, not the least of which is that he can’t find a job to unretire to.

I don’t like telling these stories because I feel sympathy toward those who thought they were well positioned to retire. Tom Wogan (age 60) had worked 36 years for the same company, had built a $1.1 million retirement portfolio, and his 55 year old wife was still employed. But he couldn’t stay with his retirement plan. Let’s briefly review the mistakes that he made.

1. He did not have a secure retirement income plan.

The Wogans had a large chunk of wealth invested in the market but no plan for how to use that wealth to secure a basic retirement lifestyle. This was the point of yesterday’s post on creating a plan for guaranteed retirement income. Most of us should not risk our basic retirement income needs in the stock market.

2. He retired with a mortgage.

It doesn’t matter when or where you retire, you need a place to live. The safest way to retire is to a place that you own, 100%. Retiring with a mortgage can place enormous financial and emotional pressures on you. If you want to retire but have a mortgage, consider downsizing or relocating to an area where real estate is more affordable. I have lots of resources on this site for finding places where the cost of living is lower.

3. He retired while still supporting three kids in college.

This is a hard one. You want to help your kids finish their education. I understand that because that’s what we are doing with our sons. But in some cases you cannot afford to retire and pay for your children’s education. I understand that too. The Wogan’s apparently put themselves in an untenable position by trying to do both. Sometimes you have to make a tough choice.

I am not picking on the Wogans. I feel bad for them. I also want to learn from what has happened to them and to others being forced out of retirement by finances.

We should hope for the best but plan for the worst.

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