Retirement is something most of us look forward to as we contemplate a release from the day-to-day responsibilities of running a business or fulfilling the requirements of a job. It should be a time to reap the benefits of our hard work and enjoy travel, leisure, hobbies and the freedom to do what we please.

Unfortunately, there are three major life events that can derail the best-laid retirement plans. Any one of them can materially affect your retirement status, lifestyle and quality of life.

This article will discuss some ways to prepare for these possibilities and provide some damage-control techniques to employ if you get caught off-guard.

1. Catastrophic Illness or Death of a Spouse

Health insurance coverage, at least for catastrophic illness, is a must, particularly as retirement age approaches, because medical costs can strip away retirement savings very quickly. According to a 2005 study by Harvard medical School, catastrophic-illness costs are a leading cause of bankruptcy for couples over 50 years old.

Another type of coverage, which is often overlooked, is disability-income insurance. This can safeguard your earning ability prior to retirement by continuing to pay an amount close to your salary if you become disabled and cannot work.

Adequate life insurance to cover the funeral expenses of a spouse is also a good idea, as funeral expenses continue to rise and could put a severe dent in the fixed income of the survivor. (Learn how to determine who will inherit your policy and how in Life Insurance Distribution And Benefits.)

While establishing and nurturing a circle of friends is important and beneficial at any stage of life, it can be critical to have that support during the major life changes that accompany retirement. Proximity to family also becomes increasingly important in preparing to mitigate the effects of spousal loss or illness. Planning to move to be near family support can help financially, physically and emotionally in preserving retirement quality.

When considering your proximity to family and friends, also be sure to position yourself close to medical facilities. This can reduce the costs of transportation, in-home services and therapy. It can also reduce the time and effort expended to use those services - an important consideration in preserving retirement assets and quality of life.

Planning to secure assets in the form of trusts and careful will preparation as well as through informed medical-payment advice and tax management is also key to preserving retirement quality. It's wise to seek professional help in this area. (Learn more in Pick The Perfect Trust.)

Damage Control
After the catastrophic illness or death of a spouse, the caregiver or survivor needs to take steps to sustain him or herself. Health or mourning support groups can assist the spouses of those afflicted with specific catastrophic diseases or suffering from the loss of a spouse and can be very helpful in providing informed support on services, coping and financial assistance. Family activities and support can also provide both a social and practical help network to assist in salvaging some of the benefits of retirement for the caregiver or surviving spouse.

Having a circle of friends is equally important and helpful, and the acquisition of a new hobby, sport or other interest can provide both a social network and a mental break from the angst of the illness or loss of a spouse. Finally, arranging legal and financial affairs with the help of a professional can provide the caregiver or survivor with a more secure retirement and greater peace of mind.

2. Divorce

While a properly framed prenuptial agreement requires considerable foresight, this largely overlooked and underutilized approach can provide the very best protection for your retirement by defining and setting aside assets not jointly owned, and thus not at risk in a divorce. (Read more about pre- and postnuptial agreements in Marriage, Divorce And The Dotted Line and Create A Pain-Free Postnuptial Agreement.)

A non-contested division of assets between you and your about-to-be-ex-spouse can be very cost effective if you can agree on a fair and equitable division of assets. If successful, many more of your assets will remain with you both than if you have a contested situation that must be resolved in the courts with the attendant legal costs. Professional legal and financial advice from divorce specialists is indispensable to preserve retirement assets.

Preparing children of all ages for what is about to happen may forestall many potential relationship and financial problems that could ruin your retirement years. Preparing your circle of friends for the divorce is also important as you will want to retain the friendships into retirement. They will appreciate being included and informed, and are more likely to be there for you if they are aware of your situation.

Damage Control
Particularly if not planned for, once divorce is imminent, securing assets as soon as possible, using professional legal and financial advice, is critical to preserving retirement assets. Though tougher to accomplish after the fact, a property-division agreement may still be possible after a divorce decision has been made by both parties. Work hard to get this done, as it will affect your retirement.

Despite the turmoil at this time, it is important to safeguard your new, probably different, wishes regarding beneficiaries, distribution of assets and so forth, so be sure to update your will, your transfer-on-death designations for savings and retirement accounts, your life insurance policy and the like.

Also, particularly with an unexpected divorce, you should counsel your children of all ages. Just telling them that the divorce is happening won't be enough. Keep the lines of communication open for ongoing discussion. This is even more critical if one spouse was caught off guard, because that means the divorce may be a shock for the children, too. Remember, you will need your children in retirement.

Finally, retain your friendships and social contacts during this period – don't drop out of sight. It's best if they hear the news from you, not through the grapevine. Their reactions could affect your life in retirement.

3. Loss of Income

If the prospects for retaining your income are beginning to be a concern, there are some steps you can take to preserve your retirement. Refinancing your home mortgage at longer repayment terms (like from 15 to 30 years) to reduce your monthly payments could extend your cash reserves. It's also a good idea to plan to have six months' worth of living expenses in the bank as a contingency. (Learn whether refinancing your home will benefit you in Mortgages: The ABCs Of Refinancing. Before starting to sock away living expenses, read Build Yourself An Emergency Fund.)

Retain your industry contacts in case you need to be re-employed. Reduce your nonessential expenditures to keep your monthly expenses low, and increase your short-term savings as much as possible. Consider shifting your stock portfolio to income stocks from growth stocks and selling any nonessential property and equipment to acquire cash for savings.

Damage Control
Downsize your lifestyle to conserve cash, and seek supplemental income from new activities. Also, consider a reverse mortgage to get monthly cash from your existing home equity. If you are retired and all else fails, return to work part- or full-time.

Life events can combine to ruin your existing retirement plans. There are some preparations you can make to mitigate their effects, however, and even if you are caught off guard, there are still ways to salvage enjoyment and financial comfort in your retirement years.

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