By Nicholas Hamner
Investment Advisor Representative
[email protected]
Lane Johnson retired from the Eagles and professional football this week. He played 14 years and leaves the game as a 36-year-old multi-millionaire. That’s a great way to start an early retirement. For others facing early retirement, their options are rarely that great.
More than half of workers entering retirement are retiring earlier than they thought they would. According to a recent Transamerica survey, 58% of retirees polled retired earlier than they had originally planned to. Their reasons? Personal health or the health of others, job cuts, or just being fed up with the workplace. And of those, only 21% felt that they had enough money to retire when they were forced to retire.
So what should you do if your retirement plan suddenly becomes an early retirement plan against your will?
Figure out short-term income
If you’re working with a trusted advisor, contact them as soon as possible. You have worked with them to create a plan, and you’ll work with them to modify it for the earlier date and put it into action. Otherwise, you’ll need to find short-term income from somewhere, whether that’s filing for Social Security early, finding gig work somewhere, or some combination of both.
Revise your withdrawal strategy
The worst thing you can do if you leave a job early is panic and start pulling money without a strategy. There may be tax consequences and penalties, but there are ways to pull from an IRA or 401(k) without the 10% penalty if under 59½. And there could be long-term consequences to pulling too much money in a panic at the start.
Lock in your health coverage
Approximately 60% of Americans under the age of 65 get their healthcare through work. If you leave early, your healthcare will have to come from somewhere else. Either a spouse’s plan, COBRA from your employer, or the exchange. Once you turn 65, you become eligible for Medicare. But remember that Medicare is an individual policy. You cannot put a spouse on your Medicare, and your spouse cannot put you on theirs.
Reframe your identity and purpose
Losing or leaving a job that you have had for a long time or that you were particularly invested in can take a psychological toll on you, and potentially others depending on how hard leaving hits you. It’s a form of grief; you almost mourn the loss of self and purpose. It’s important to find another way to contribute, regardless if this early retirement is temporary or permanent.
Seek professional guidance
The best solution for unexpected plans is to have a flexible plan that accounts for all contingencies. Working with a trusted advisor to make sure your income plan, your investment plan, your healthcare plan, your tax plan, and your estate plan can handle whatever comes your way can help you make lemonade from life’s lemons whenever they appear.
So as Lane Johnson rides off into the sunset, fully ready to embrace his early retirement, know that we’re here to help you plan for the possibility of your own early retirement.