Are You Facing Unexpected Retirement? Here’s a Checklist of What to Do…, by RICK VIADER

Even if you didn’t experience it personally, you probably wouldn’t have missed the massive disruption caused by the sudden increase in unemployment. It affected families and neighbors, and it shook the economy. You may be one of those experiencing the aftershock of an unexpected retirement.

Whether you are a 50-something-year-old teacher unwilling to be exposed to the coronavirus or a near retiree who would rather retire now on your own accord or after being fired, unexpected retirement is a daunting challenge.

To relieve the stress and financial strain that may result from retiring early, it’s essential to do everything to help fund your retirement until your last day at work. Here is a checklist of things to consider as you depart work.

Preserve Your Legal Rights

Retirement and termination can cause a blur in distinction, especially when it relates to personal health. If you’re retiring due to COVID-19, it’s essential that you discuss your concerns extensively with your employer. If there’s a union or professional association related to your job, discuss your termination with them before giving your notice. Also, ensure that you document these concerns properly.

Secure Health Coverage

To save money, most people delay at least some healthcare until they’re age 65 to enjoy Medicare. If that’s your plan and you retire unexpectedly before age 65, then there’s a need to consider health insurance. Relying on affordable healthcare after you quit may not be a good idea. Fortunately, the CARES Act allows you to enjoy a temporary extension of your COBRA health insurance and the deadline to start making payments.

Still, the process can be confusing and is only temporary. You must know your options before leaving your job.

Plan When to Start Collecting Social Security

It doesn’t make sense to collect your Social Security benefits before you reach age 67, and there are several benefits to delaying it until you’re age 70. Review your financial situation to know if you have sufficient cash to carry you until you hit 70 years old. Here are some facts you should know.

• You can take advantage of the buyback option, which allows you to rescind your decision to elect to take Social Security benefits. The buyback option requires that you pay back all the benefits that you’ve received. 
• If you end up returning to work after you start collecting Social Security, the IRS will deduct $1 from your benefit for every $2 you earn from work until you hit the full retirement age.
• For couples, electing to collect Social Security benefits early on can cause losses if one partner dies. The lower monthly check caused by an early election will become permanent. 

Lean on Your Retirement Plans

As a retiree, there are ways to access your qualified plans before you clock age 60 without paying penalties. 

You can start taking early distribution as early as 55 without incurring penalties. It also makes it possible to make penalty-free withdrawals from your IRA, 401(k), and 403(b) plans.

Another fantastic opportunity is the penalty-free withdrawal offered by the CARES Act. The law allows owners of retirement accounts to withdraw up to $100,000 for COVID-related expenses. In this case, the tax is deferred to be paid within the next three years.

Consider Part-time Employment

Leaving your job doesn’t mean you have to stop working for good. There are several part-time opportunities out there to keep you busy and bring in extra income. For instance, you can take up a job in teaching or counseling, or become a business coach or life coach, etc.

Include Extra Income Sources

Your plan must encompass other income sources that can bring in extra cash. Your life insurance payments may come in handy in supplementing your retirement savings. Additionally, if you’re married, your spouse’s income may go a long way to supplement yours.

Focus on Your Financials

Retirement planning is more about planning your financial journey after work. You must pay attention to your taxes and insurance payments – if you’re old enough for Medicare, then it’s a plus. 

Conclusion

If you find yourself on the verge of early retirement, know that you’re not alone. A lot of other people are in the same situation. Overall, sudden retirement requires a thorough budget review, setting up the banking structures, and paying your bills.