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When plans to retire go awry

No matter how carefully you've prepared for your retirement, some unforeseen events -- such as losing your job, your health coverage, or a big chunk of your savings in a market crash -- could derail your plans.

Consumer Reports Money Adviser's experts suggest some ways you can minimize the financial impact of five "what ifs":

*What if: You stop working earlier than expected.

What to do now: Beef up your savings and cut your debts. Make sure you have six to 12 months' worth of living expenses in a liquid emergency fund. Make sure you and your spouse have sufficient disability insurance.

If it happens: You can generally expect one week of salary for every year you've been with your company. If your company lets you choose to take a lump sum or series of payments, consider taking the payments if your company is financially sound.

Your employer might allow you to keep contributing to your 401(k) plan, and continue your health insurance, life insurance and other retirement benefits for as long as the payments last.

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*What if: Your investments tank.

What to do now: Make sure you and your spouse's asset allocations are appropriate for your ages and risk tolerances. Consumer Reports Money Adviser recommends reviewing your portfolios periodically and rebalancing them.

If it happens: Remember, you'll probably draw down about 4 percent of your assets each year. So a drop in the market won't necessarily mean you're in desperate trouble, especially after you factor in your other investments, Social Security and any defined-benefit pension payments.

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*What if: You lose your spouse.

What to do now: Look at what income will be lost if either spouse dies. For example, if you and your spouse both worked long enough to collect Social Security, a survivor will lose the lesser of those two payments in most cases.

If you have a traditional defined-benefit pension plan, federal law requires the option to provide your surviving spouse with a joint and survivor annuity, which allows him or her to receive benefits if you die first.

If it happens: If you planned ahead, you'll have enough available cash to sit tight for about six months and see whether your estimates were correct or whether you need to tweak your budget.

As long as property passes outright to the surviving spouse through a will, trust or by law, it should qualify for the unlimited marital deduction and not be subject to estate tax. But the surviving spouse will have to create a new estate plan to minimize any future estate taxes that might occur at his or her death.

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*What if: Your kids need financial help.

What to do now: Consumer Reports Money Adviser suggests considering nonmonetary ways to help, such as offering a family car that you no longer need or drawing on your professional network to help your child land a better-paying job.

If it happens: Avoid tapping your retirement accounts or taking on more debt.

If a child needs a place to live, for example, consider letting him move in with you but charge rent. If you need to lend your child money for another purpose, try to structure the loan so that everyone benefits. For example, you can take money out of a savings or a money-market account with an anemic interest rate, and charge your child 4 or 5 percent interest on the loan.

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*What if: You can't sell your home.

What to do now: Base your retirement assumptions on how much your total savings will be worth, excluding anything you might earn on the sale of your home.

If it happens: You might want to delay selling by a year or two to give the market in your area some time to recover, as long as you can afford to stay in your home. To speed up a sale, make sure your home is priced right.

By the editors of Consumer Reports at www.consumerreports.org.

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