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The front page headline story in today’s USA Today is about retiring before you want to. McKinsey & Co. surveyed those that are at or near the traditional retirement age of 65 to see what their expectations are and what the reality is. The results should send a shiver down the spines of a lot of people that haven’t planned for retirement.

• Nearly half of the Baby Boomers in the study expected to work past 65 to supplement their retirement income. The reality? Only 13% of current retirees worked past that age, a 35% difference in expectation and reality.
• 40% of retirees were forced to retire earlier than they had planned.
• The average age at retirement? 59!

Among those that were forced to stop working before they intended, it was split about evenly among those that were laid off and unable to find work and those that had a sickness or injury that forced them to leave the workforce. Both of these reasons are unforeseen and can really strike at any time.

What happens if you do get laid off? Most people would say “get a job” but are you really going to be able to find a job past 50? A study cited in the article says that a younger worker has a 40% better chance of being called for an interview than an older worker. Employers think that they can hire a younger worker cheaper and they will likely have fewer health issues that could affect employment are the main reasons that employers tend to prefer younger workers. On average, AARP found that workers over 55 spent 25% more time unemployed than youngers workers did after being laid off.

One way that older workers are getting around these hurdles is by going self-employed and become consultants in their professions. Consultants work on a contract basis, so the health and pay issues may be alleviated. Also, the experience of older workers is a goldmine for consultants rather than a perceived liability as an employee. Older workers are 60% more likely to be self-employed than younger workers and almost a third started their businesses after 50.

So, what can you do now to plan? Having an emergency fund helps, but having a 3-6 month fund won’t do much good if you are laid off and unable to find permanent work. As always, putting away as much as you can in a retirement fund as early as possible is a good idea. However, you can’t touch your IRA until you are 59 unless you meet certain critera. Getting laid off at 55 and having an IRA won’t help a whole lot. Buying long-term disability insurance is a good idea, but will only pay off if you are disabled.

That doesn’t leave a whole lot outside of taxable investment accounts to serve as an emergency backup. While I am loathe to suggest putting taxable money away when so many opportunities are available for tax-free income, it might not be a bad idea if you are in an industry prone to downsizing. Of course, how many GM employees in 1966 thought their industry would be in so much trouble now? That’s what I am looking at trying to plan for when I’m 65.

Any ideas out there?