Jul 12, 2026
Just over half of Americans have a specific age when they want to retire. Unfortunately, not everyone gets to retire on their preferred timeline. In fact, 42% of Americans end up retiring earlier than expected and often for reasons they cannot control.
According to Allianz’s 2026 Annual Retirement Study, a job loss later in life is a top cause for an unplanned early retirement, with 58% of baby boomers indicating that losing their job could push them out of the workforce for good. Unfortunately, when this happens, it can be a big problem for those who aren’t quite ready to support themselves on their investment income.
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Let’s pretend, for example, that Alex is 64 years old and has been let go from his job after 27 years. He has a little bit of severance pay and his employer has agreed to pay for health insurance until he turns 65 and becomes eligible for Medicare. But Alex isn’t sure if he can really afford to retire since he has only $800,000 invested.
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Alex really doesn’t want to look for another job, but how can he make sure he’s ready to leave work for good?
Define what retirement means
The first big thing Alex needs to think about is what “retiring” actually means to him.
“For many people these days, retirement doesn’t necessarily mean never working again,” Mary Ware, a CFP, senior wealth advisor and managing partner at Carnegie Private Wealth, told Moneywise. “It may mean consulting, working part-time, or pursuing a second career that provides both income and purpose while giving your retirement savings more time to grow.”
Alex may not want to go out and get another full-time job. But he could join the 38.3% of employed older Americans working part-time. With 27 years of experience in his industry, consulting could be an option that both allows him to bring in some extra income for a while and potentially even save more to build his nest egg instead of beginning to draw the balance down.
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Consider his spending needs
If Alex doesn’t want to keep working in any capacity, he’ll need to really consider whether he has enough invested to live on. And that answer isn’t so clear-cut.
“An $800,000 portfolio might be enough for one person and nowhere near enough for another,” said Ware. “The answer depends on annual spending, cost of living, other sources of retirement income such as a pension or Social Security, your investment mix, health care costs, whether you own your home and plan to downsize, taxes, and how long your money may need to last.”
Ware said that she generally recommends that people who are approaching retirement practice living on their expected retirement income for a year. “While that’s difficult if you’ve unexpectedly lost your job, you — or a financial professional — can still run the numbers and create a realistic spending plan based on what your retirement income would look like,” she advised.
Ware believes that doing a practice run, or creating a detailed spending plan, could shed light on whether Alex may need to reduce expenses, work part-time, keep working and saving more, or whether he’d be comfortable living on his investments alone.
Understand all of his income sources
Ultimately, the big question is, what sources of income will Alex have and how much income will it produce?
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Assuming Alex follows the 4% rule, an $800,000 portfolio would support an initial annual withdrawal of $32,000. That’s not a lot for most people to live on in their later years, especially when healthcare expenses can be significant.
He could add Social Security to his investment income and benefits generally replace around 40% of pre-retirement income.
However, claiming Social Security at 64 would be an early claim. Since Alex was born in 1962, his full retirement age is 67, so claiming three years early would cause his standard benefit to shrink by around 20%. That’s a big hit to take, especially since some workers actually end up with more lifetime Social Security income by waiting until 70 to claim benefits.
Alex will need to weigh the pros and cons of an early claim and see if the $32,000 his investments produce would be enough without Social Security if he decides to wait.
He should also explore what kinds of opportunities may be available to allow him to continue earning and shore up his finances for a little bit more security in his later years.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
