In order to fulfill our day to day demands, we all work at least 8 and some12 hours each day. During this fight, what happens when you receive a termination letter from your company at the age of 55? You had planned your life perfectly, including a retirement at 65 but a forced early retirement would be a disaster for you both mentally and financially. There could be several reasons behind this FER such as health, stamina, technical upgraded knowledge, recession or anything else.
Don’t panic because you are not alone. According to research, most American workers are forced to quit their jobs between the age of 55 and 58, instead of their planned retirement age. So, what should you do to save yourself from such a disastrous situation? Just one thing: Don’t stick to just one plan but have multiple ones such as financial planning, extra income resources or savings. Don’t just let early retirement stop you from what you want to achieve in your life.
Be Realistic about your Financial Condition
Don’t panic because you have lost your job. Also, avoid using credit cards to save your cash as it will increase your debt. Keep one thing in mind that you don’t need to hide your financial reality from yourself. Always try to make a financial assessment such as monthly expenses and loans etc. Do the analysis of your cash flow and try to avoid the extra expenses.
Avoid Emotionally Driven Decisions
Withdrawing amount from your 401k account just because you are having a short term financial crisis would be a foolish decision. When you are laid off or downsized, you have the opportunity to move your company 401 k to a rollover ira or a self-directed 401k. With a self-directed 401 k, you have the ability to take a personal “loan”. This is not a taxable distribution but a loan which has a five-year payback. This could be one way to tide you over until you find other employment and then you can pay the loan back without paying any taxes or penalties. This should be a “last case” decision just in case you never can repay the loan.
Look for Additional Income Source
Chances of getting job decreases with increasing age, but don’t lose hope and try to find a new job. Get registered with various recruitment agencies, talk to a friend, register on recruitment portals online or start networking but never give up, because leaving the job factor on the side, the golden asset you have is an experience.
Home Equity is a Better Option
In case you really need to borrow some money to cope up with the financial crisis, then home equity line is one of the better options. You will be charged lower interest rates/fees in comparison to your credit cards.
Health Insurance
Even if you have lost your job, health insurance is not an option to miss at all. If you don’t qualify for the government planned insurances, go for some low-cost insurance plan but never let your health insurance get collapsed. (Try insurance exchange that comes under the Act “Affordable Care”)
Social Security
Taking social security benefits varies according to the situation but if you need to choose between taking money from IRA and claiming social security, the latter would be more beneficial (in short life expectancy case). Although it is often suggested that you should wait until the age of 70 to claim your social security.
Consult a Certified Financial Advisor
Seeking advice from a CFA would be the best option as he can help you in all the above mentioned plans. If you get panic easily and not a good decision maker then your CFA would surely help you to turn your early retirement into a joyful one.
An early retirement can be upsetting and depressing but a good strategy to cope with it is all you need. We would suggest you seek the advice of a financial planner now, to manage any financial ups and downs in your future.