3 Ways to Cope with Sudden Retirement

If you had to retire tomorrow, would you be prepared? Retirement is something you anticipate happening in the distant future; so, most people wouldn’t be prepared if they were forced into retirement out of the blue. If you’ve found yourself facing an unexpected early retirement, we’ve put together 3 tips to help you get organized and cope with this sudden step into retirement life.

• Evaluate Your Financial Situation
• Determine What Benefits You’ll be Receiving
• Adjust Your Spending Habits 

Evaluate Your Financial Situation

As with any sudden change in life it’s important to take a step back and evaluate your situation in its entirety before making any rash decisions. When you retire your income stream generally decreases substantially, but your expenses may not, therefore, it is vital to assess your cash flow and where you’re spending it. Sitting down with your financial planner to review your retirement accounts is a good first step, but each situation is unique and there are always many factors to consider, this is where a little financial planning will go a long way. If you have a spouse, you may be able to rely solely on their income, supplemented by your retirement benefits.

Depending on the circumstances surrounding your unexpected retirement, assuming you didn’t want to stop working and that you don’t have any health issues prohibiting you from doing so, another viable option is to re-enter the workforce. Getting a part-time job may be a necessity due to your financial situation or it may just be something you want to do to provide yourself a little extra financial cushioning, not to mention a way to spend your free time. Many retirees find that they need to find a new sense of purpose in retirement, if you’re simply looking for a way to spend your time, explore volunteer opportunities and ways you can strengthen your social connections.

Will You Be Receiving Any Benefits?

Before leaving your employer be sure to check what type of severance or early retirement packages may be available to you.

In addition to benefits from your previous employer, look into when you can begin receiving your Social Security benefits. You should also note that if you retire before the “normal retirement age” (currently 67) your Social Security benefits are reduced by 0.0056% every month until you reach normal retirement age, up to 36 months. Once past 36 months, the benefits are reduced by 0.0042% which is a reduction of your already reduced benefits. For example, if there are 60 months between when you retire and start collecting Social Security and the normal retirement age, your benefits are reduced by 30% total over those 60 months.

The best time to start collecting Social Security benefits is age 70. You will receive the greatest number of benefits with no reductions if you can wait until then.

Adjust Your Spending Habits

Unfortunately, your bills don’t retire when you do. If you have house or car payments left, you still have to pay those except now you don’t have your income to rely on.

Don’t underestimate the cost of healthcare. If you previously had health insurance through your employer, you need to plan for the cost of healthcare until you are eligible for Medicare. You should also plan for additional out-of-pocket healthcare costs throughout your retirement years.

Create a Realistic Budget

Without the safety net of your income, and with a longer retirement period than you may have planned for, you need to make your savings and/or benefit payments last as long as you can. Creating a budget is the best way to look at your current financial situation, factor in your regular expenses (this should include mortgage payments, insurance, car payments, healthcare, groceries, internet, etc.), and decide how much you need per month to cover your basic expenses, give you some spending money, and leave you with enough for an emergency fund.

Need Help Navigating Early Retirement? Talk to a Financial Advisor

At JMB Financial Managers, we are here to help guide you through early retirement and find the plan or budget that best fits your unique needs.

If you want to learn more about financial strategies to help you cope with an early retirement, get help understanding your current financial situation, or walk through building a budget with an expert, contact us today for a complimentary consultation.

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About the Author 

Jack Brkich III, is the president and founder of JMB Financial Managers. A Certified Financial Planner, Jack is a trusted advisor and resource for business owners, individuals, and families. His advice about wealth creation and preservation techniques have appeared in publications including The Los Angeles Times, NASDAQ, Investopedia, and The Wall Street Journal. To learn more visit https://www.jmbfinmgrs.com/.

Connect with Jack on LinkedIn or follow him on Twitter.