Many working-age Americans have at least some idea of when they want to stop working and sail off into the sunset. But sometimes there can be a major gap between what we plan and what actually happens.
For many workers, one such gap is between the age at which they want to retire and the age at which you discover that you have to retire instead. A surprisingly large percentage of American workers are forced into early retirement for a variety of reasons. Those reasons include job termination, layoffs, personal health issues, or a need to care for elderly parents or other relatives.
Of course, early retirement can come with its own financial headaches. You might need to begin taking Social Security early for a reduced benefit. Or you might have to deal with not having enough savings to last for the rest of your life. Whatever the challenges, it’s a period of major adjustment.
Early retirement means that you will have fewer years to save for retirement. You will also have a longer period of time over which you must stretch your money.
What if you plan to work until age 65 or 70? It’s wise to create a financial projection of what your retirement will look like if you had to stop working at age 55 or 60.
And don’t be surprised if you run into some sort of income shortfall. Not everyone is fully prepared to retire early when forced into retirement. So, to be ready for that possible outcome, you might have to make adjustments to your plan accordingly.
Work Longer…. Retire Early?
Transamerica Center for Retirement Studies released a report showing that many retirees plan to continue working. In the study, just over half of all surveyed workers planned on working past age 65 or for as long as they are physically and mentally able.
However, this doesn’t prove to be the case for lots of working-age Americans. Research conducted by the website NerdWallet revealed that its participants retired at an average age of 61. Over 40% of all respondents reported that they had quit working before age 60.
Nearly one-fifth of respondents reported that they were forced to quit working due to poor health conditions. Meanwhile, almost 10% reported that they had lost their jobs. Ultimately, about a third of respondents said that they had no control over when they had to retire.
The Bureau of Labor Statistics also published findings showing that over the past 30 years, the number of workers who worked past age 65 dropped off steeply across the board.
What Should You Do if Forced into Early Retirement?
Here are some tips that you can follow now in the case that you find yourself in unexpected early retirement:
1. Don’t panic.
As the NerdWallet survey and other studies have found, many workers find themselves being forced into early retirement due to unexpected reasons. Job termination, layoffs, and health issues are just a few possibilities. Sometimes people have to leave their jobs for caregiving duties to loved ones, as well.
If you find yourself being forced into early retirement, take a step back. Then take stock of the situation. Head home, turn on your computer, and start reviewing your retirement plan.
Then begin putting together a plan B so you have a readjusted plan for the future. Hopefully this will just be a temporary situation. You don’t want to throw out your “plan A” of what you have counted on for your retirement already. The goal is to keep your original plan as intact and on track as possible.
2. Ask the big questions, including the most pressing one: Can I afford to retire now?
Unexpected life changes bring the chance to revisit retirement plans and goals with newfound clarity. Look at your accumulated portfolio assets and your savings.
Have you already charted out how much income and what income you believe they will generate? Could you afford to retire now based on what you have already built up in your nest egg?
It’s prudent to answer this after a thorough review of your situation. An early retirement can add many years of post-career life that you weren’t planning on covering financially.
Test out multiple scenarios: different sources of income, cuts in spending, and various liquidations of different assets. You want to see what outcomes might arise. The more you can model these scenarios as realistically as possible, the more you can prepare yourself for any needed contingencies.
A single-premium immediate annuity may come in handy here. It can pay you a guaranteed stream of income that will last for the rest of your life. This is true even if you fully deplete your initial principal that you put into the contract.
3. Do you need to work part-time to supplement income gaps?
If your accumulated assets and income aren’t enough, part-time employment may be a viable alternative to supplement your income.
Should you need immediate income, you might look at gig-economy opportunities. Your personal and professional networks might also yield new consulting or freelancing opportunities for someone with your unique skill set.
If you need more immediate cash-flow, gig-economy platforms like Uber or Lyft can present easy-to-start money-earning opportunities. However, your vehicle has to be 15 years old or younger. If you look at other ‘gig opportunities’ as an income source, check to see if there are any similar terms like this vehicle age rule.
Handyman projects or home services may also be another quick-start way to supplement much-needed income. No matter what, the skill sets that you have refined over many years can be put to good use here. You just might have to be a little creative.
4. Consult a financial professional for guidance.
With a financial professional’s help, you can look over your portfolio and your income to see where you are now. From there, you can decide what further steps you can take to secure a happy retirement. This isn’t a journey you need to take alone.
A competent financial professional is almost certain to point out some options that you haven’t considered. Don’t hesitate to enlist one’s expertise to help you with your analysis.
Guidance from an experienced financial professional be a great source of relief and comfort in helping you work through these difficult times. Let them help you find a light at the end of the tunnel.
If you are on the lookout for a financial professional to help you, peace of mind may be a few clicks away. Financial professionals at SafeMoney.com are ready to assist you. Use our “Find a Financial Professional” section to connect with someone directly. Should you need a personal referral, call us at 877.476.9723.