Numerous surveys have shown that people think that they are
going to retire later than it happens. The two big reasons: health issues and
losing your job. According to the Employee Benefit Research Institute (EBRI),
47% of American retirees in a 2013 survey retired before they planned, mostly
because of health or disability.
Unplanned or unexpected early retirement can create havoc
with your retirement plans. Some who had to retire early weren't quite ready
financially: Those five or 10 additional years of saving for retirement were no
longer possible. Some may have had to take Social Security earlier than
expected. And, as we all know, the earlier you take Social Security, the lower
your monthly check.
Some advice on how to
be ready in case unexpected early retirement happens to you:
• Do an assessment.
You should look at cash flow, balance sheet, insurance and estate plans to get
an idea of where you are today and the impact of earlier-than-expected
retirement.
• Plan for the
unexpected. If you pre-rehearse those types of contingencies, you are
far more likely to make good decisions in an emotional moment. When you know
your fears, you can react to them and plan for them.
• Build an emergency
fund. You want to make sure you've built an adequate emergency fund.
• Consider what you
want in retirement. Once people get into their 50s, they need to look
at how early they can retire, based on what they want
• Reduce debt. The
more you can lower your committed expenses, the more flexibility you have.
• Maximize
contributions to your 401(k) and minimize fees. The more attention
you have paid to your retirement plan, the better you position yourself for an
unexpected retirement.
If and when that
unexpected and unwanted retirement does happen, here are eight tips on what to
do.
1. Prepare for a
range of emotions. Feel them and process them, but avoid feeling compelled
to act on your feeling immediately.
2. Examine your
budget. Make sure you are comfortable with how much it costs to
support your living expenses. When you are faced with a surprise entry into
retirement, you have to identify your fixed expenses and your discretionary expenses.
3. Set up a time
to talk to human resources, if possible. Assess your resources and
sources of support.
4. Look at your
current lifestyle. Look at your current living environment and say,
'Can I support this lifestyle?' It may not be easy but you have to make some
major changes. Some people will go into denial and keep living as they were and
not making changes, because it is an emotional issue. Counseling them on the
emotional side is just as important as the financial side.
5. Do not raid your
401(k). It still is best to conserve assets in your 401(k) plan if at
all possible because they are tax deferred, and you may pay penalties.
6. Consider an encore
career. Retrain and enter a new chapter. Our first question is how retired
are you going to be?
7. If you are
retiring for health reasons and are unable to work, visit the Social
Security Administration. If you can't work for health reasons, you
can apply for disability benefits and collect at whatever age you might be. If
you have young children you can collect checks for them, too.
8. Pay attention to
your physical health. Changes can be stressful. Monitor your sleep and
strive for healthy diets and regular exercise to combat stress.
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