We're several months into the coronavirus pandemic, and millions of Americans are still struggling financially. Roughly 1.4 million people filed for unemployment benefits the week ending July 18, according to the Department of Labor, an increase of approximately 100,000 claims from the week before.
If you lose your job later in life, you have a couple of options. You could try to survive on your emergency savings and unemployment benefits for as long as possible while you search for another job, or you could retire early.
Early retirement can be challenging, because you won't have as much time to save as you would if you'd waited a few more years to retire -- but if you don't have any other options, you can still make it work. Although you may not be able to save as much for retirement, there are a few things you can do to ensure it's as comfortable as possible.
1. Look into your healthcare options
Losing your job often means losing your health insurance as well, and going without insurance is an incredibly risky move -- especially during a global pandemic.
If you're at least 65 years old, you may be eligible to enroll in Medicare. But if you're younger than that, you'll need another plan. Married individuals may be able to enroll in health insurance through their spouse's employer; otherwise, you may need to consider enrolling in COBRA insurance, or buying insurance through the Affordable Care Act marketplace.
You may be eligible for COBRA coverage through your former employer if you were laid off, but this type of insurance is often incredibly costly. COBRA coverage is also only available for up to 18 months, so if you retire before age 63 1/2, you'll need to find another healthcare option to bridge the gap between when your COBRA coverage expires and when you're eligible for Medicare. Buying insurance through the Affordable Care Act marketplace is another option, but depending on where you live and what's available, coverage could be expensive here too.
Shop around and research all your different options to decide which one fits your needs (and your budget) the best. Going without health insurance is a major risk, so it pays to have a plan in place.
2. Consider claiming Social Security early
You can begin claiming Social Security benefits as early as age 62, and in some cases that could be a smart idea. If you've been forced into early retirement, the money you'd receive in benefits can go a long way toward making ends meet. Claiming early can also mean withdrawing less from your retirement account, helping your savings last even longer.
Before you file for benefits early, though, make sure you've thought about the advantages and disadvantages of this approach. When you claim earlier than your full retirement age (FRA) -- which is either age 66, 66 and a few months, or 67, depending on the year you were born -- your benefits will be reduced by up to 30%. By waiting until after your FRA to claim, you'll receive your full benefit amount plus a bonus of up to 32%.
If your savings are sparse, it could be a good idea to delay benefits to take advantage of those bigger checks. However, if you're retiring in your early 60s (or even earlier), it may not be feasible to wait several years to begin claiming benefits. If you can swing it, delaying benefits is a wise move. But if delaying benefits would result in draining your retirement fund, claiming early may be your best bet.
3. Create a thorough budget
When you retire earlier than you'd planned, you may need to get creative with your spending to ensure your savings last as long as possible.
First, create a budget by mapping out all your expenses. Once you know where all your money is going, divide your expenses into various categories and try your best to cut back at least a little in as many categories as possible. Even if you can't save much, every little bit counts. And the more you're able to cut back, the longer your retirement savings will last.
The COVID-19 pandemic has been tough for millions of households, and some unemployed workers may find themselves with no choice but to retire earlier than they'd planned. While early retirement can be a challenge, with some extra planning and preparation you can make the most of your situation.