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5 Things to Do Immediately if Retirement Comes Sooner Than Planned

By Christy Bieber - Dec 6, 2020 at 8:31AM

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Acting quickly is key to salvaging your plans.

For many Americans, retirement arrives not by choice but by circumstance. Unemployment, family, or health issues may make it necessary to leave the workforce before you're ready, which can affect every aspect of your future plans. 

One of the biggest consequences of an unexpected early retirement, however, is the financial impact. Being forced to retire early gives you less time to save and more time to rely on your savings. This can be a big problem that may leave you struggling for money throughout retirement if you don't make the right moves immediately.

In particular, there are five things you should do ASAP if you've had to leave the workforce ahead of schedule. 

Older couple looking at financial paperwork with pen and calculator.

Image source: Getty Images.

1. Take stock of your situation

Getting a clear picture of your financial reality is the first step in coping with unplanned early retirement

To do that, make a list of essential expenses, as well as any potential sources of income you'll have, including investments, Social Security, your spouse's income, alimony, or real estate rental properties. 

2. Make a decision on Social Security

Once you know how much money you need and all the possible sources of funds available to you, you can decide if you'll claim Social Security right away or delay. 

Social Security benefits can be started as early as age 62. But if you don't wait until full retirement age, early filing penalties will reduce the amount you receive and you'll get up to 30% less than your standard benefit. And claiming before 70 means you'll have to forgo any delayed retirement credits you'd have earned if you waited until after FRA. These credits could increase your standard benefit by up to 32%. 

You may not have a choice but to claim Social Security and give up the opportunity to maximize your monthly check. But if you can survive without these benefits, you'll at least want to consider delaying as waiting until 70 is the optimum choice for the majority of retirees

3. Decide on a safe withdrawal rate

Retirees typically can't live on Social Security alone as these benefits are designed to replace only around 40% of pre-retirement income. That means you'll need to start relying on your savings to help support you.

You want to make sure that savings lasts, though, so you can't take too much from your accounts.

In fact, before you withdraw any money, develop a strategy for safely withdrawing funds. There are a number of options, including taking out a specific percent each year. Evaluate which one is right for you so you can see how much income your investments can produce for you. 

4. Set your budget

Your decisions on Social Security and on a safe withdrawal rate will dictate the amount of money available for you to spend as a retiree. Once you know those numbers, sit down and make a budget for yourself, allocating the income available to your needs and wants. 

5. Make any necessary lifestyle changes ASAP

When you make your budget, you'll be able to see if you can afford to continue your current lifestyle despite your unplanned early retirement. If you find it's not sustainable without draining your investment accounts, act quickly to make spending cuts to preserve your nest egg.

Sometimes, this means making big lifestyle changes such as downsizing, getting rid of one of your vehicles, or relocating to an area where your money will go further due to a lower cost of living. If you have to make these changes, do it ASAP. 

If you act quickly, you can salvage your retirement and ensure you still have at least some measure of financial security, even if you had to leave the working world well before you planned. 

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