How to Course Correct If You Get Hit with an Unexpected Early Retirement
Between 1992 and 2016, 56% of all workers age 50 and older were forced into an unexpected early retirement, according to a recent study by the Urban Institute and ProPublica. Some of these folks lost their jobs due to layoffs, corporate downsizing, and buyouts. Others decided to retire because of a pay cut or deteriorating conditions at their workplace. And still others retired due to health concerns or other personal issues.
Any time I see a statistic saying that something happens to 50% of retirees, that gets my attention. A number that big means unexpected retirement should be on everyone’s radar as they move into the second half of their careers. Fortunately, my Keen Wealth team is familiar in dealing with this all too common issue. So, on today’s show, we talk about the steps that we go through to help folks cope with unexpected early retirement and engineer a new path forward.
Listen to the Episode
Simply "click" or "tap" on the "play" icon in the image below to listen to the episode. If you'd like to subscribe to the podcast using an Apple product (iPhone, iPad, iPod touch) click here to learn how. If you use an Android phone, we recommend using the Podcast Addict App, which can be downloaded here.
Download the Transcript Here
1. Don’t panic.
When your employer hands you a severance package or buyout offer with a deadline, it can feel like the clock is ticking. That sense of panic only gets compounded by all the hurt feelings and worry that can come with an unexpected job loss.
That’s why it’s so important that you take a breath, try to set your emotions aside, and avoid any kneejerk reactions. Don’t run out and sign up for Social Security just because you’re eligible. Don’t immediately roll over your 401(k) into an IRA. Don’t cash out any of your other retirement assets because you feel like you need a safety net.
In short: don’t do ANYTHING until you’ve gathered yourself and worked through the next two steps with your spouse and financial professionals.
2. Put together your net worth statement.
If you don’t already have one as part of your financial planning, you need to put together a simple balance sheet that lists all your assets and liabilities.
Important items to include are:
Assets
- Annual income
- Real estate
- Personal valuables (vehicles, jewelry, etc.)
- Bank accounts
- Investment accounts
- Retirement plans (401(k), ESOP, IRA, pension, etc.)
- Business interests (ownership, equipment, etc.)
Liabilities
- Credit card debt
- Mortgage
- Vehicle loans
- Personal loans
- Potential upcoming expenses (such as a health care or housing issue).
This statement will give you a road map of where your life is right now, as well as a view around the bend at what you might need in the near future.
3. Assess your options.
Now, to get a more complete picture of your financial situation, we’re going to examine how certain decisions could impact your net worth statement and a potential early retirement scenario.
Health care. If you are the spouse who provides health care for your family through an employer-subsidized plan, you’re probably eligible to stay with that plan through the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA coverage can last for 18 months, but you will be paying the premium out of pocket. If you’ve never checked how much your employer pays to subsidize your coverage, that cost might be a bit of a shock.
If your spouse also works, you should check if his or her employer offers health care coverage you can both start using.
If you’re old enough, Medicare is another option, but remember that Medicare is not a group option. If your spouse isn’t 65 he or she will have to get coverage elsewhere.
The last option is buying insurance yourself from your state’s Affordable Health Care Act marketplace.
Social Security. Social Security generally does not provide a large enough benefit for most retirees to live off of. You need to check your current benefit statement to see what you are eligible for. It’s usually best not to pull this particular lever unless it’s absolutely necessary, especially if you intend to find another job. The longer you work, the larger your benefit ultimately will be. But once you start taking Social Security you’re locked into that benefit amount.
Saving and Investment allocations. We recommend that our clients try to save enough cash to cover six months of their expenses in an emergency bucket. We might consider tapping into these reserves to cope with an unexpected early retirement. Another option would be scaling back regular monthly investment contributions until cash flow has stabilized. We’ll also weigh the pros and cons of cracking open retirement accounts early. And if you’re bringing a 401(k) or ESOP with you from your old job, we’ll decide if rolling that account into an IRA is the right move.
Potential sources of additional income. Filing for unemployment is an option for folks who plan to find another job. Just be aware that this is one of those decisions that shouldn’t be automatic, because there are some complex rules to navigate. We’re also going to look at any pensions you might have and any other additional income that might be on the table as part of your severance or buyout package.
Always plan ahead.
An unexpected retirement is just one reason that we place so much emphasis on having financial plans done well in advance. When you’ve spent the better part of a decade planning to retire at 65 and you’re facing an unexpected job loss at 58, there’s real comfort in being able to look at your plan with your fiduciary advisor and plot the adjustments that can keep you on course.
Let’s have a chat about where you are in your career, where you hope to be when it’s time to retire, and, how we can create a plan to help you navigate through life’s unexpected curveballs.
When I started writing Keen on Retirement: Engineering the Second Half of Your Life, my goal was to create a useful tool on financial planning to complement my blog and podcasts. I truly believe this tool is important, so for a limited time, anyone who would like to receive a signed, personalized hardcover copy of the book at no charge, can email me at bkeen@keenwealthadvisors.com.
My sincere thanks to all of the friends of Keen Wealth and the Keen on Retirement audience who helped make the Kindle version of the book an Amazon best-seller in Budgeting and Financial Risk Management!
Please share this page and the podcast with your friends and colleagues via Linkedin, Twitter and Facebook. You can use the share buttons. Thanks! Got a question or comment? Email it to me and we'll get back to you or call our office at (913) 624-1841.
About Bill
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.