A lot of things in retirement are beyond your control. You can’t control what will happen with interest rates or the financial markets. You can’t control your health and what kind of care you may need in retirement. You can’t even control how long your retirement will last.
However, you might be under the assumption that you can at least control when your retirement starts. After all, you get to decide when you retire. If you feel you can afford to retire early, you have the right to do so. Similarly, if you need to catch up on your retirement savings, you have the option to push back your retirement date.
That assumption may not always be true, though. You may not get to decide when you retire. According to a study from the Employee Benefit Research Institute, nearly half of all retirees say they were forced to retire earlier than they had planned.1
Forced early retirement is a reality. And if you are forced to retire earlier than you’d anticipated, you could face financial challenges. You may have to dip into your retirement savings earlier than you had expected. You may have to file for Social Security benefits earlier than you had planned.
Do you have a backup plan in case you’re forced to retire early? If not, now may be the time to develop one. Below are a few common reasons why people are forced to leave the workforce early, as well as tips on how you can manage the risk:
Think disability won’t happen to you? Think again. According to the Council for Disability Awareness, Americans on average think they have only a 2 percent chance of becoming disabled. The reality is that the average worker has a 25 percent chance of suffering a long-term disability.2
As you age, it’s natural to assume you may be more vulnerable to injuries and illnesses. It’s possible that you could suffer an injury or illness that limits your ability to work. If that happened, how would you support yourself and your family?
You can protect yourself against this risk with tools like individual disability insurance. You pay premiums for the insurance today, and in exchange, you’ll receive a benefit to support yourself should you ever become disabled. While your employer may offer disability insurance, and Social Security sometimes covers disability, you may find that the coverage under those programs is insufficient to meet your needs until you retire.
The possibility of losing your job to layoffs or restructuring may be something you don’t want to consider. However, it’s a possibility in any industry. Even in strong economic times, organizations are always looking for ways to become more efficient and streamlined.
Again, consider what the consequences may be if you were to lose your job a few years before your planned retirement date. Do you have enough assets to support an early retirement? Would you be able to find a new position?
There are several steps you can take to minimize this threat. One is to keep investing in your skills and abilities so you stay valuable to your employer and to potential new employers. Another is to build a sizable emergency reserve fund so you have assets to bridge the gap between job loss and retirement.
Ready to develop your backup plan for forced early retirement? Let’s talk about it. Contact us at Bam Advisory Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. 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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