Early Retirement: Can I Afford It?
Dec 15, 2020
COVID-19 has undeniably had major economic impacts on individuals and their families. For some, the pandemic has caused them to have to face the tough decision of whether or not to retire early. Pressure from employers to retire before planned can make this decision even more stressful. Other situations can prompt early retirement as well, such as health issues or family responsibilities. If you are considering early retirement, or feel like you have no choice in the matter, there are many factors to consider.
Can I Afford to Retire Early?
Withdrawing from retirement funds earlier than planned can be risky and can come with financial penalties. Retiring before your company’s retirement age (typically 65) means you’ll receive smaller benefits. Even if you can afford to retire now, will you still be able to reach all of your retirement goals? And, often an overlooked question, is your health a factor when considering your future financial needs? Rather than retiring early, is this a welcome opportunity to change careers or look for additional employment opportunities?
Employers will often entice employees with an early retirement package, which is in essence a severance package. Incentives may be added to further encourage employees to retire, such as paid wages, paid insurance, outplacement services, salary continuation, bridging salary, coaching or additional innovative benefits. While these offers may seem enticing, it’s important to consider what happens when these incentives run out. To decide if you should accept an early retirement offer, you can’t just look at the offer itself. You have to consider your total financial picture.
A Plan of Action
If retirement doesn’t seem like an affordable option right now after taking all these factors into consideration, it’s probably a good idea not to accept a retirement package, and to rethink your retirement and career plans. The longer you remain in the workforce, the shorter your retirement will be and the less money you’ll need to pay for it. If you can’t afford early retirement but you have no choice, you may need to consider another job. The best plan of action when faced with a financial decision this impactful is to seek out the advisement of an experienced and knowledgeable retirement financial planner.
Early retirement can feel like a bumpy road, and navigating every facet of your decision can be stressful. Charles Stephen can help you take a thorough look at your unique situation and guide you through your options. Give us a call at (888) 884-0451. We look forward to meeting you.