One of the trickiest decisions you might make during your career is figuring out when to end it. But even then, things may not go according to plan.
You never know when health issues might force you to end your career sooner than expected. Or you may find yourself downsized out of a job before your preferred retirement age arrives.
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A late-2024 Transamerica survey found that 58% of workers wound up retiring sooner than they'd initially planned. If the same thing happens to you, here are two essential moves to make quickly.
1. Assess your savings
When you're forced to retire early, it's important to figure out how much savings you have and what savings you have access to immediately. Funds in an IRA or 401(k) generally must be left alone until age 59 1/2 if you want to avoid a 10% early-withdrawal penalty.
Once you've figured out which money is available when, calculate how much you can afford to withdraw yearly.
For example, it may be that you were pushed into early retirement at age 58 1/2, and you have enough cash savings to cover your costs for a year until your IRA or 401(k) plan becomes accessible penalty-free. But if you're going to start tapping your retirement account in a year, you'll need to take withdrawals carefully to avoid depleting your nest egg.
Financial experts tend to agree that 4% is a safe withdrawal rate if you expect to need your savings to last for 30 years. That also assumes you're pretty evenly invested in stocks and bonds.
But depending on your retirement age and investment mix, you may need to withdraw even more conservatively than that. It's important to run those numbers before you start taking money out of your long-term savings.
2. Line up health coverage
Many people's health insurance is tied to their job. If you're now out of work, you may not have insurance, which is not a situation that should continue. A single healthcare emergency could cost you an unfathomable amount of money without insurance.
If you don't have a spouse's insurance plan you can join, and you're within 18 months of turning 65 and being eligible for Medicare, COBRA may be an option. COBRA allows you to retain your workplace health insurance for a limited time.
But COBRA can be prohibitively expensive, since you're paying the full cost of your employer's health plan premiums. You may want to look at buying a Health Insurance Marketplace plan instead, even if you're only bridging a gap until Medicare kicks in.
Being forced into retirement could upend your finances. Make sure to assess your savings and line up health coverage right away to help minimize the blow.
