A 59 year-old client used to complain constantly about his job and management team. In fact retirement couldn't come soon enough. That is until he found himself on the chopping block. After almost 28 years of service he was suddenly thrust into retirement and despite being just a few years short of his planned retirement age and disdain for working, he wasn't prepared for it to happen. "Sudden Retirement" is a growing reality among baby boomers and is often just as scary and troubling as divorce or the loss of a loved one. Whether it's a buyout, company closing, or job elimination there are a myriad of emotional and financial issues that can impact a client's overall well-being when they are forced into retirement.  Therefore, it's important for advisors to have specific strategies and resources in place to help them deal with it.  

In 2010, 41% of retirees stopped working earlier than they expected. The most common reasons for retiring ahead of schedule were:
    Poor health (54%)
    Work-related, including downsizing and closure (37%)
    Need to care for a spouse or family member (19%)

Extrapolate those numbers across 78 million boomers and we have a serious issue on our hands, my friends. Financially speaking, baby boomers will no longer be saving toward retirement, they'll be dipping into savings for personal and healthcare needs, and adding significant weight to our already burdened Social Security system. Then there are the immediate emotional issues they have to deal with such as replacing their work identity, filling their time with meaningful activities, and staying active as well as socially connected.  Many of which they took for granted when working.  

As you might expect, sudden retirement can overwhelm a client. But it can also be a source of stress and pressure for an unprepared advisor. While there are a number of issues to address surrounding the topic, I want to focus on two major issues and offer advisors some concrete solutions.

In a case of sudden retirement, an advisor's first and foremost concern is asset allocation. Basic financial planning would suggest a transition to less aggressive and more stable investments in order to safeguard investments and help them acclimate to a new and different lifestyle.  But don't expect rational or logical thinking during this time. Clients often want to amp up their risk tolerance and dabble in something that doesn't remotely fit their new investment profile like penny stocks, futures, and even currency. Usually because a friend has been making a ton of money in pork bellies or Iranian currency (seriously, I've heard both). Their logic? They want to make up for lost future savings or squeeze a little more income out of their portfolio.  

It's one of those situations where it's best not to be caught off guard. If your client has given it a lot of thought and seems convinced it's the best way to go, don't just throw out some random rule or cliché philosophy. Instead, I suggest two things. One, have a guide line for speculative investing. Allow them to take the plunge and dedicate some of their newfound time and attention toward investing. I usually suggest investing up to 10% of their portfolio speculatively. I'm careful to denote that since they have 20-30 years in retirement, they should start with 5% and work toward 10% by the end of a 12-month period. Second, help them develop a process for doing it effectively.  Suggest caveats such as staying away from investments that trade for less than $5, buying on an uptick, and to use limit orders for best price execution.  

In the end, it may be worth your while to develop a relationship with Scottrade or TD Ameritrade to establish advisor view privileges.  This way you can monitor an account's progress (or lack of it) while helping your client avoid the guy buying pork bellies or the lady with easy access to Iranian currency.  

The second thing I suggest has to do with the emotional aspects of sudden retirement. There are both immediate and long-term issues with which advisors should be familiar with.  From the short-term perspective it's important that advisors not take the situation too lightly.  A client's initial reaction may be to downplay the event and his or her feelings about it. That can make it easy for an advisor to play along with comments like "Well, you're better off anyway" when in fact the situation can lead to serious repercussions including the dark side of retirement (see "The Dark Side of Retirement," January 19, 2011).   

Instead, be a source of encouragement and support.  Shine a positive light on the situation with questions like:
    What are three things you've always wanted to do but weren't able to because you were busy working?
    What's the best thing about this and what do you think you'll enjoy most about this new opportunity?
    Have you ever thought about turning a hobby or passion into a small or part-time business?  

After a short discussion, use follow-up responses like, "Sounds like your best days are still ahead of you," to put them at ease and to support their intentions.

From the longer-term perspective, becoming more aware of the stages of grief is a good starting point.  As I mentioned earlier, sudden retirement, like divorce or the loss of a loved one, can be a difficult transition. Sudden retirees typically progress through a series of grief related stages, which usually take the form of an uncomfortable emotional experience that may even cause symptoms such as fatigue, sleeplessness, and irritability. This is usually followed by a period of working through it by developing a retirement-based identity. Finally, once the situation has been accepted, barriers are removed and they catapult back into a routine and a sense of normalcy.

Whether it's a financial or emotional issue, advisors have a powerful opportunity to help their clients deal with a difficult situation. The sudden retirement trend is sure to continue and advisors will continue to be called upon to help clients make more than just the financial transition. By simply being aware of the issues associated with sudden retirement, being prepared to help clients embrace it, and making a commitment to the client's overall well-being, advisors will not only see their business flourish but so, too, will they enhance their own personal well-being. 

Robert Laura, president of SYNERGOS Financial group, a Michigan-based RIA, is the author of Naked Retirement and is the co-founder of the RetirementProject.org. A regular contributor to fa-mag.com, he provides Retirement Wellness Workshops for individuals, organizations, and employers. He can be reached at [email protected].