Early retirement is a dream for many Americans. It gives you the opportunity to enjoy your golden years while you’re still young and relatively healthy. It also may give you a chance to pursue some lofty lifelong goals that may not be feasible when you get older.
While early retirement may be a dream for some, it’s a very real nightmare for others. That’s because it’s often not by choice. Many workers are forced into retirement, either because they are laid off and can’t find a new job, or because they become disabled and can’t physically work.
If you have to retire before you’re ready, you could find yourself in a very challenging situation. You’ll lose out on valuable years of saving and retirement account contributions. Plus, you’ll add on years in retirement in which you will have to fund your lifestyle. Also, you may be forced to retire before you’re eligible for Medicare or Social Security, further compounding the issue.
The good news is you can take steps to protect yourself in the event you are forced into early retirement. While early retirement may not be your preferred outcome, it doesn’t have to be a disaster. You can also take steps to minimize the odds of forced retirement.
Check out the three tips below. If you haven’t implemented these steps, now may be the time to do so.
Create a budget and take it for a test drive.
If you are forced to retire early, one of your most important financial tools may be your budget. A budget tells you where you spend your money, how much you can afford to spend and what adjustments you need to make. If you retire earlier than planned, you will need all that information so you can make smart spending decisions.
Develop a lean budget that eliminates unnecessary spending. Look for ways to achieve your retirement and lifestyle goals without draining your savings and investments. Also, make sure your budget is lean enough that you are required to withdraw only a modest amount of income on an annual basis.
After you’ve developed your budget, try living on it for an extended period, like three or even six months. Are you comfortable on that budget? Are you happy? Is it a feasible expectation you could live on that budget in retirement?
If so, you may have a great spending plan in place. If not, you may need to adjust your budget or your expectations.
Protect your earning ability.
You may have saved a significant amount for retirement. However, if you have several years left in your career, your most valuable asset may still be your ability to work and generate income. Like your other valuable assets, this is one that you don’t want to expose to too much risk.
One serious risk is disability. Think disability is unlikely to happen to you? Think again. According to the Council for Disability Awareness, most workers believe they have less than a 2 percent chance of becoming disabled. They actually have a 25 percent chance.1
You can minimize the threat of financial difficulty due to disability by purchasing disability insurance. You pay premiums today. Then, if you become disabled in the future, the insurer pays you a monthly benefit that you can use to pay your bills and fund your lifestyle.
You may have disability insurance through your employer. However, group plans sometimes don’t offer a robust benefit or may have restrictive qualifications and criteria. Look at individual plans to see how they compare with your group option.
Make yourself valuable.
Layoffs can happen in any business and any industry. You may not be able to control your business’s financial stability. However, you can take steps to minimize your chances of being cut.
Just because the end of your career is in sight doesn’t mean you should take your foot off the gas pedal. Keep looking for ways to make contributions. Take on difficult projects. Volunteer for tasks that others shy away from.
Also, keep learning new skills. Take classes on new technology and methodologies. The knowledge you gain could keep you from getting laid off, or it could help you find a new role if you do lose your job. You may not want to invest time and money into career education. However, that investment could serve as insurance for a safe and secure retirement.
Worried about your risk level?
Contact us at Gregory Financial Group. We welcome the opportunity to consult with you, identify risks and develop an action plan. Let’s connect soon and start the conversation.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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