5 Ways to Prepare for an Unplanned Retirement

We like to think that we can carefully plan out when we'll retire and how we'll spend those carefree days. But too often, carefully planned retirements are derailed when people find themselves pushed out of the workforce. Steve Wolf and Mary Murley, a married couple with 11-year-old twin sons, are watching their retirement dreams recede farther into the future. Roughly 40 percent of their life savings has evaporated in the stock market in the past year. To make matters worse, Wolf, 55, was laid off from his engineering job in February, and now the family's sole source of income is Murley's part-time job as a classroom aide. Wolf isn't limiting his job search to their hometown, Grand Rapids, Mich., so the couple put their house up for sale—priced below what they paid for it seven years ago. But so far, there have been no bids on the house or job offers for Wolf. "I was hoping that we would be able to sell our house and make up the loss by purchasing someone else's foreclosure," says Murley, 53. "But if we sell the house tomorrow, we'll probably end up living with my mother in Ohio." Here's how to cope with an unplanned retirement.

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Prepare for emergencies. The majority of Americans suffer some kind of financial shock during their working life, which could easily dismember their retirement plans. Many adults between ages 40 and 79 have endured job loss (18 percent), divorce (29 percent), the death of a spouse or life partner (10 percent), a serious illness or long-term disability (24 percent), or the illness or disability of a child (7 percent), according to a recent AARP Financial and Boston Research Group survey. Only 43 percent of those surveyed made it to middle age or older without some sort of financial emergency. Plus, about 47 percent of current retirees say they left their jobs sooner than they had planned, according to an Employee Benefit Research Institute survey. Building up an emergency fund is essential to surviving each of these problems. Baby boomers need a plan for health insurance coverage until Medicare eligibility kicks in at age 65 and life insurance to help support dependents. They should also look into disability payments in case they become unable to work.

Job-hunt before you need a job. Once older workers are unemployed, they tend to remain out of a job longer than their younger counterparts. In June, the average unemployed person age 55 or older took 30 weeks to find a new job, compared with 21 weeks for those under 55, according to the Bureau of Labor Statistics. It helps to explore second-career possibilities and network while you are still employed in case you should find yourself searching for a new job. Mal Krinn, 69, baked bread at home as a hobby on weekends for 30 years, occasionally selling it to local bakeries, while working full time as an ophthalmologist in Bethesda, Md. The day after he retired in 2002, Krinn took a full-time job baking his unique creations, such as green olive bread, wheat bread with pumpkin seeds, and cherry chocolate bread, among others, at his son's restaurant, Inox, in McLean, Va. "Peruse your interests because, as you get older, who knows what kind of opportunities might come along for you to switch careers into something you were kind of doing as a passion or a hobby," Krinn says.

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Be willing to accept lower status and pay. When you're laid off at age 50 or older, it can be tough to find a new job with the same level of seniority. Some baby boomers are now taking a step back down the career ladder. A recent survey by Harris Interactive and CareerBuilder of managers with influence in hiring decisions found that just over a quarter have received entry-level job applications from workers over age 50 (26 percent) and retirees (11 percent). A few employers (7 percent) said older workers have even applied for internships at their organizations. Smaller paychecks often accompany these lower-status jobs. According to an Urban Institute and AARP Public Policy Institute analysis, when older employees switch jobs, their median hourly wage drops from $16.86 at the old job (in 2007 dollars) to $10.86 at the new job. Workers who change employers are also less likely to have a pension and health insurance at their new job. "I make a lot of dough, but I don't make much money," agrees Krinn about his baking job.

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