4 Steps To Take If You Are Forced Into Early Retirement

Smiling senior couple at breakfast table

Every year, there are many retirees that are forced into an early retirement.  In fact, according to the Employee Benefit Research Institute, almost half of retirees enter retirement earlier than they planned.  Of those early retirees, only a quarter of them choose to retire early willingly.  The same research also indicated that the most common and uncontrollable situations that can force a person to retire early are poor health, having to take care of family member, or a job lay-off.

Those retirees who choose to retire early willingly often do so because of job dissatisfaction or because they desire a change in lifestyle.

No matter what circumstances are causing you to retire earlier than planned, you will need to make adjustments. Your original plans may have to be totally reworked, and you may find that things you had accounted for are no longer needed.

Regardless, there are steps you can take to move from defensive to offensive with your financial strategy.

1.  Review your benefits. While you didn’t think you would need them this early, your benefits are there.  Included in these benefits are things like Social Security, options for healthcare, and your spouse’s benefits.  If you are unable to claim Social Security and haven’t reached the eligible age to receive Medicare, you may need to look into alternative options.

2.  Look at your investments. You’ll need to make some decisions about your 401(k), IRA accounts, and other investments. It may be best to postpone withdrawing any money from these sources to preserve your retirement savings. Otherwise, you’ll need to start curbing your expenses to match your income from your investments.

If some investments aren’t giving you the returns you expected, like a real estate investment, it may be best to sell it and save the money.

3.  Consider your pension payments. If you have a pension, you need to consider either taking out a lump sum or receiving it in monthly installments. Both of these options could work well, but it depends on your situation.

If you are an experienced investor or working with a financial advisor, you might find that a lump sum is beneficial so you can build on it with the right assets. If you want to rely on it as part of your monthly income, taking it in installments may be best.

4.  Estimate how long your money will last. Don’t blindly enter early retirement. Look at your income and estimate how long that money will last based on your expenses and budget. You’ll see where you need to make adjustments and how they’ll affect your lifestyle.

If you have additional questions on this topic and other issues related to early retirement, please download this e-book, Unforeseen Circumstances in Retirement.  If you have questions specific to your set of circumstances, the best next step you can take is to seek the advice of a qualified professional.

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