Managing an Early or Unexpected Retirement

By: Stacey Nickens

Before the COVID-19 Pandemic, many Americans retired earlier than expected. Some individuals retired ahead of schedule because they saved successfully and were financially able to do so. Others became weary of the daily commute and grind.

However, according to a study by Allianz Life, more than half of Americans are forced into early retirement due to factors outside of their control. Of those individuals, a majority of Americans retired early after losing their job or experiencing health problems.

With unemployment hovering around 13%, more and more Americans may be faced with the prospect of retiring earlier than they had planned. Additionally, some may begrudgingly choose to do so in order to protect their own health. 

While retiring earlier than you have planned may sound scary or financially precarious, there are steps you can take to manage this unexpected reality.

Determine Your Gaps

If you retire earlier than planned, begin by figuring out your healthcare coverage. Retirees 65 and older are eligible for Medicare. However, younger retirees will need to explore other options.

Consider if you’re eligible for a Consolidated Omnibus Budget Reconciliation Act (COBRA) plan from your former employer. You may also consider joining your spouse’s plan or purchasing a plan through a state or federal healthcare exchange. 

When budgeting for healthcare, be realistic about your increased expenses in retirement and make sure to take into account dental and vision plans. Additionally, reviewing your expenses may lead you to consider claiming Social Security. However, it’s always best to wait as long as possible before taking Social Security, if postponing is financially feasible for you and your family. 

Look Into Guaranteed Income

Without a consistent paycheck, you should consider another form of monthly income through various financial products. Looking into an annuity, for example, could ensure the security of regular income as well as provide protection against volatile markets. 

However only a third of not-yet-retired individuals have a guaranteed form of monthly income in their financial portfolio, and only 3% consider it a priority. In reality, ensuring you have a method of covering month-to-month expenses is of utmost priority when preparing for the unexpected.

Consider Part-Time Work

Though unemployment numbers are still high, you might consider applying for remote or part-time work as the economy improves. Doing so might not only solve the paycheck problem —you may even have access to employer-provided healthcare. 

Try to keep an open mind when applying for jobs and have faith in your diverse skill set. While it may seem difficult to start another job or career later in life, doing so could prove to be fulfilling and stabilizing.

Seek Advice

Planning for retirement is challenging in the best of times; however, with so much uncertainty in the world right now, financial and healthcare fears may be consuming your life. Rest assured knowing that ELM3 Financial Group has your back. We are here to answer your questions about Social Security, guaranteed income, and other financial planning concerns that may arise. While your original retirement plan may be compromised, your dreams can remain intact, and we are here to help you thrive and grow into your future. 

Source: Kiplinger

Disclosures: Past performance is not a guarantee or a reliable indicator of future performance. All securities carry a unique set of risks subject to a variety of factors. There is no guarantee that these investment strategies will work under all market conditions or that they are are suitable for all investors. This material has been distributed solely for informational purposes and should not be considered as individual investment advice or recommendation. Individuals should consult their investment professional prior to making an investment decision.