What causes people to retire early—and how to stay prepared

If you had to retire earlier than planned, would you be financially ready? Let’s look at the impact COVID-19 has had on baby boomer retirement rates, the factors that have historically led to unplanned early retirement, and steps that can help ensure that if you’re suddenly forced to stop working full time, you’ll have the ongoing cash flow you’ll need.

COVID-19 has played a role in prompting early retirement

Although global pandemics aren’t typically on the list of reasons to retire early, the spread of COVID-19 has coincided with an uptick in America’s retirement rate. A report published last fall showed that 3.2% of working baby boomers retired in 2020, more than double the 1.5% who did so a year earlier.1

Business interruptions and resulting job losses related to the pandemic likely played a role in these retirement decisions. Another possible factor: A good, long taste of life without a commute among those boomers forced a switch from on-site to work-from-home status.

Retirement rates among baby boomers jumped significantly in 2020

Percentage of workers leaving the labor force due to retirement, by year

The factors most likely to lead to an unplanned early retirement, the effects of COVID-19 on baby boomer retirement rates, and steps to help make sure you’re financially ready if you’re forced to retire before you planned to.

Source: “The pace of Boomer retirements has accelerated in the past year,” pewresearch.org, 11/9/20. Includes workers born between 1948 and 1984. Each year’s retired boomer population is based on the average July, August, and September estimates.

The evergreen drivers of earlier-than-planned retirements

Historically, three life factors—or shocks, as the researchers refer to them—have led to workers retiring earlier than planned. In rank order, they are:

1  Negative changes to the worker’s health

2  Changes in employment that include losing a job to layoffs or a business closing—or a switch to a job viewed as stressful or requiring too many hours

3  Family changes such as a spouse’s retirement, the declining health of a spouse, a change in marital status, a child leaving or a parent moving into the house, and the arrival of grandchildren2

Millions experienced one or more of these shocks over the past two years. COVID-19-affected workers’ and their spouses’ health and shuttered businesses put folks out of work and spawned new multigenerational households, if only temporarily.

These types of events can happen to anybody—even without the added stress of a pandemic. But especially if you’re age 50 and older, there are steps you should take now to keep your retirement income strategy on track, even if your career is suddenly cut short.

Staying prepared for the possibility of early retirement

If you’re age 50 or older, you may have already started looking at your potential retirement needs and formally planning to create the income you’ll need to meet them. If so, these same steps can help keep you on track, should you be forced to retire early.

Step 1: Keep a running tally of your expected retirement spending needs

Based on today’s budget and your plans for the future, put together a thorough list of the three main types of retirement expenses:

1  Basic expenses—All the bills you’ll need to cover on an ongoing basis, including housing, food, transportation, insurance, and clothing

2  Healthcare expenses—Start with medical coverage (whether Medicare or private) and an allowance for out-of-pocket costs

3  Nonessentials—Including travel and entertainment, as well as other flexible costs, which may be important to an enjoyable lifestyle but can be trimmed back as needed

In the case of early retirement: You’ll need to adjust your expense estimates to reflect any financial milestones (such as paying off a mortgage or college loans) you would’ve reached by your original target retirement age but haven’t yet accomplished.

Step 2: Know your sources of retirement income

Over the course of your career, you may have accumulated quite a few savings and investment accounts, as well as other income-producing opportunities. Be sure to stay on top of the location and value of the following assets:

  • Retirement accounts—Including 401(k), 403(b), SEP, Keough, IRA, cash balance, and traditional pension plans
  • Investments outside your retirement accounts—Most likely mutual funds, money market funds, and brokerage accounts
  • Additional savings—Such as regular (after-tax) bank accounts and certificates of deposit (CDs)
  • Other potential sources of income—Which may include things such as wages from part-time work, income from rental properties, and trust fund distributions
  • Social Security benefits

Retiring early? You’ll need to factor tax penalties on early retirement plan and IRA distributions—plus age-based Social Security payout schedules—into your calculations.

Step 3: Identify any gap between retirement income and spending

Before you take any long journey, you want to know that the road ahead is in good shape. And if you’re faced with the prospect of retiring long before you planned, it’s important to know you’ve got the financial resources to make it through all those years.

Armed with information from your retirement expense calculation and income estimate, try creating a future monthly or annual budget. If you’re falling short, consider reassessing your investment approach and retirement lifestyle.

If you’re looking toward an early retirement, whether voluntarily or not, here’s something to keep in mind: Experts point out that retirement expenses tend to create a U shape over time—higher in the early years when you may be more active and paying down big expenses, dipping for a period in the middle, then rising again later in life as medical costs increase. As an early retiree, your expenses might still follow this trend, although the first, higher-expense phase might be longer than if you continued working into your mid-60s or later.

Preparation can ease the transition to an unexpected early retirement—and help is available

If the income planning steps above seem too challenging to handle, don’t hesitate to reach out for support. Many employers make guidance and interactive tools available to their retirement plan participants, and a financial professional specializing in retirement can help you tailor a strategy to your needs and situation. 


The pace of Boomer retirements has accelerated in the past year,” pewresearch.org, 11/9/20. 2 “What Causes Workers to Retire Before They Planned?” Center for Retirement Research at Boston College, crr.bc.edu, September 2015.

A widespread health crisis, such as a global pandemic, could cause substantial market volatility, exchange-trading suspensions and closures, affect the ability to complete redemptions, and affect fund performance; for example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.