4 Life Events That Disrupt Retirement Planning

Life is full of surprises. Whether it’s job loss, divorce, or health issues, unexpected events can significantly disrupt plans to save for the future. When it comes to planning for retirement—a decades-long process—all it takes is one unforeseen change to put that planning on pause. But there are ways to prepare for the unexpected.

With government resources and expert-recommended strategies in your back pocket, there’s no reason for life’s changes to completely derail your retirement savings plan. Here’s what you need to know to anticipate change when preparing for retirement.

4 Life Events That Disrupt Retirement Planning

It’s hard to prepare for every curveball life might throw at you, but it’s certainly possible to cover the bases. Life events like divorce, job losses, health issues, or the death of a spouse are significant events that can put a strain on retirement planning.

1. Divorce

A divorce can have a serious impact on retirement planning. Potential changes in household income or the division of assets can affect how much money you can set aside for retirement savings. 

“Though it is state-specific, generally speaking, any retirement funds that are subject to distribution are divided between the parties, even if only one person earned the funds during the marriage,” says Nicole Sodoma, author and founder of Sodoma Law.

If you have a spousal or child support obligation and are saving for retirement, Sodoma says you could be slow to contribute to retirement accounts. After all, you may not have enough money left over after meeting those financial obligations. 

Divorce doesn’t mean starting from scratch, but you may have to review your plans to protect your retirement. Taylor Kovar, CEO and Founder of Kovar Wealth Management, notes that divorce “may require individuals to revise their retirement goals, increase savings rates, or delay retirement to rebuild their retirement funds.”

2. Job Loss or Layoff

Job loss can significantly impact a household budget, as well as retirement plans. 

“A job loss or layoff interrupts the ability to save money and may mean people have to use some of their savings for day-to-day expenses,” says David John, Senior Strategic Policy Advisor at the American Association of Retired Persons (AARP). Depending on your circumstances, a job loss could make it hard to stay on track for retirement savings. This could result in having a smaller amount available for use at retirement or delaying retirement altogether, John adds. 

Being laid off or fired could mean you cannot contribute to an employer-sponsored retirement savings plan, says David Dufault, Principal Attorney at Sodoma Law.

“When you consider that many employers provide the additional benefit of an employer-matched contribution to retirement, additional savings will also be lost,” Dufault says. But if you were contributing to a non-employer plan like an IRA, you’d still be able to make contributions. 

Dufault also notes that a job loss may require you to repay any loans you might have taken out against your retirement savings. He adds, “job loss will most certainly slow down your ability to put money away for your future use.”

3. Health Issues

Similar to job loss, significant health issues impact retirement savings when you’re forced to take time off or quit work. 

“Employer-sponsored plans require the participant to maintain employment, and significant enough health issues could limit your ability to work,” Dufault notes. 

The cost of treatments for health issues could make matters worse. Most people get their health insurance through their employer, so exiting the workforce because of an illness or while facing one can be financially and medically devastating. 

Health problems could also bring about the need for long-term care, Kovar says, which can deplete retirement savings. “It may also force early retirement,” he adds, “reducing the time to grow retirement funds and [increasing] the duration of drawing down these funds.” 

These situations often come with little advance notice and leave individuals with less savings than expected, John says. He recommends building contingency plans into your overall retirement approach, as well as researching any available government benefits that may apply.

4. Death of a Spouse

“The death of a spouse is a personal tragedy that often comes with financial repercussions,” John says. End-of-life care and funeral expenses can drain finances and retirement savings. He says life insurance may cushion the impact and allow the surviving spouse to access shared assets. 

It is common to see both spouses working, Dufault says, with each contributing to their own retirement. However, this is not always the case. “If you are in a situation where your deceased spouse was the sole contributor towards retirement, you may be faced with a need to join the workforce to begin contributing or to look to non-employer methods to begin saving for yourself,” Dufault says.

Strategies To Handle Disruptive Life Events

To get ahead of potential disruptive life events, you can employ several strategies to help manage and navigate changing retirement situations.

Review and Adjust Retirement Goals

In the case of a disruptive life event, reassessing your retirement goals and making any necessary adjustments is an important part of bouncing back. 

“The potential for unexpected shocks is always present,” John says. “Recognizing this fact and having a plan—even an imperfect one—can help reduce the shock and help people to meet the challenges.” He encourages everyone to establish a retirement plan and regularly review it as circumstances change. 

Whether it’s adjusting expectations or adjusting savings goals, consistently reviewing retirement goals can make it easier to handle disruptive life events. Including these adjustments in regular family discussions is also key. Everyone in your family must know about the changes and where resources are allocated.

Create a New Budget

Responsible money habits include altering budgets to weather any disruption. To be financially prepared for life events, Kovar recommends setting up and maintaining an emergency fund to cover at least six months of expenses. “Also, diversify investments to mitigate risks, and consider insurance policies like life, disability, and long-term care insurance,” he adds. 

Along with adjusting contribution amounts to retirement saving plans or changing monthly spending, be aware of spending against the budget and update it as circumstances change.

“Stay informed about your retirement accounts, benefits, and government resources,” Kovar said, so you can handle disruptive life events without sacrificing retirement savings.

Maximize Retirement Contributions

Being proactive about retirement savings and contributions will set you up for success during difficult times. Maximizing retirement contributions before or after your income has recovered from a disruptive life event can help prepare or make up for any setbacks. 

Whether it’s maxing 401(k) and IRA contributions or simply starting to contribute regularly or frequently, increase retirement contributions when your income allows. Doing so will benefit your retirement savings balances, which can be used as emergency savings in worst-case scenarios.

Focus on the Long Term

Finances aside, significant and unexpected life events can be overwhelming. Focusing on long-term savings and making rational decisions with the future in mind is the best course of action. Focusing on the long term also means taking legal steps to prepare and protect your family in case of an unexpected event. 

“Create a comprehensive estate plan, including wills and healthcare directives,” Kovar says. This preparation will ensure the legal aspects are in place should an unexpected event occur.

“Try to educate yourself as much as possible about the financial and retirement aspects in your life and/or marriage,” says Dufault. “Life happens, and if you can educate yourself about the rights you have as a surviving spouse or divorced spouse, you will be better off in the long run,” he adds.

Seek Professional Advice

Retirement planning can be a lot to handle under the best of circumstances. It can be helpful to seek guidance from financial advisors or retirement planners to navigate challenging life events and get tailored advice specific to your financial situation.

Government Programs and Resources

Government programs and different resources can provide assistance during disruptive life events. For individuals who just experienced the death of a spouse, Social Security Survivors Benefits offer critical support, especially for young families with children. Dufault notes this government benefit may also include coverage for the surviving spouse from a marriage that ended in divorce.

Medicare and Medicaid also support seniors and low-income individuals seeking financial assistance for health emergencies. Unemployment benefits can help during a job loss or layoff.

Also, many nonprofit organizations offer support for those experiencing disruptive life events. “[They] have information to help people understand and manage their benefits and understand what is available and their options for the future,” John says. Plenty of resources are out there to help if distressing life events disrupt your retirement plans. 

The Bottom Line

Unexpected events and expenses are a part of life. Divorce can derail retirement planning, change household income, and divide assets. Job loss or layoffs can lead to income loss and the need to pull from savings to supplement expenses. Health issues can increase medical expenses, and the death of a spouse can create increased financial challenges for end-of-life care and funeral costs. 

But there are plenty of strategies and resources available to help. Ultimately, being proactive about retirement planning means expecting that your savings might be interrupted at some point in your working life. Resilience is critical to long-term prosperity.