Life happens. Sometimes retirement plans change even though you do everything right on your end.
Whether because of a health issue, layoff or something else with your employer, you might find yourself exiting the workforce well before you originally planned. If this happens, you may end up struggling to deal with the financial instability.
Here are some of the top tips if something happens to your retirement plan before you originally anticipated.
1. Figure Out Health Care Quickly
Health care is the first thing to figure out. If you aren’t covered and something happens, you might end up in serious financial trouble. Healthcare is usually a top expense in retirement, usually only trailing housing costs.
There are a few ways to bridge the gap between your current situation and until you’re eligible for Medicare at age 65. The first, easiest, and simplest plan is to transition into your spouse’s workplace plan.
If they aren’t employed or employer doesn’t offer much in terms of benefits, we recommend checking out COBRA. This is an insurance plan through your old employer that lets you stay in your existing plan for up to 18 months.
The only problem with this strategy is that you are required to pay the entire premium, which can get expensive quickly. For example, if you were paying 25% or 30%, now you’re responsible for 100% of the premium each month.
The final option is private insurance which offers flexibility and peace of mind. However, it’s expensive and depending on past medical conditions, might be tough to acquire.
2. Create a New Savings & Social Security Plan
Typically you will need 70% to 80% of your working income to cover each year of retirement. Social Security usually gets around 40% for the average American but it’s up to you to fill the gap.
If you’ve been a saver during your life, you might have enough funds to stretch your time out of the workforce before retirement. But if not, you might need to look at your brokerage accounts, 401K, IRA, pension, HSA or even a home equity loan. The goal is to try to calculate how many years you have covered at the 70-80% mark.
You can also start to receive Social Security payments at age 62. Keep in mind that if you do start collecting Social Security early, your benefits are reduced as opposed to waiting until you reach your full retirement age.
Waiting to take your Social Security benefits can make a pretty dramatic impact on your Social Security income versus starting at 62.
3. Find Additional Income Opportunities
You may not necessarily have to stop working unless you’re unable to do so due to physical demands. If you are leaving your employer because of restructuring, you might be excited to find another opportunity.
If you’re looking for part-time opportunities, think about becoming an advisor consultant with skills you’ve acquired over your career. Perhaps you could even launch your dream business. It’s never too late to follow your passion!
Are you unexpectedly looking at retiring early? Simply request a call from a Bayntree financial advisor today and we can help you determine your options.
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.