It's been months since the pandemic started, and millions of Americans are still struggling with the financial impacts. Over a million people filed for unemployment over the last week, and data from the Labor Department showed the unemployment rate has risen to about 15 percent.
You have a few options if you lose your job. You can try to survive on the unemployment benefits and savings until you find another job or retire. Early retirement comes with many challenges, mainly because you won't have time to save more. However, if you don't have any other options, there are ways you can make it work. Although it may not be easy, you can do a few things to ensure you live comfortably in retirement.
1. Look into Your Healthcare Options
Losing your job means losing the healthcare coverage that comes with it, and it's a significant risk to be without healthcare insurance, especially in a pandemic. If you are age 65 or above, then you are eligible for Medicare. However, if you are younger, you'll need another plan. If married, you may get healthcare coverage through your spouse's employer; otherwise, you should consider enrolling in COBRA insurance or buying healthcare insurance in the marketplace.
Buying health insurance through the Affordable Care marketplace depends on where you live and what's available there. The cost varies, so shop around and research various options to find the one that fits your needs and budget.
2. Consider Claiming Social Security Early
You can start claiming Social Security benefits once you are 62 years old, and in some cases, it's a smart thing to do. If you decide to retire early, claiming Social Security benefits will provide sufficient funds to go a long way in allowing you to make ends meet once you are eligible. Early Social Security withdrawal also means you'll withdraw less from your retirement savings.
However, ensure you consider the benefits and disadvantages before filing for Social Security. Keep in mind that when you withdraw from Social Security before reaching the full retirement age (FRA) – which is 66½ years, depending on when you were born, your Social Security benefits will be reduced by up to 30%. And if you wait a few years after hitting FRA, your benefit amount might increase by 32%.
If your savings are sparse, consider leaving your Social Security for a few more years to take advantage of the bigger checks. If you can handle it, delaying your benefits can prove beneficial, but ensure it doesn't lead to draining your retirement savings.
3. Create and Follow a Budget
When you retire earlier than planned, there's a need to become creative with your spending to ensure your savings last as long as possible. Create a budget mapping out all your expenses. Once you discover where the money is going, divide your expenses into various categories and reduce each category's amount. The more you can cut down, the longer your retirement savings will last.
Conclusively, while retiring early comes with a significant risk, if you don't have a choice, the tips above can help you make the best out of your situation.