What to Do if COVID 19 Forced You Into Early Retirement

How often have you found yourself saying, when I retire, I plan to…?

You might fill in the blank with reading, travel, volunteering, or playing golf more than you do today. The idea is that once you retire, you will have time to do the things you want. You create this vision of retirement early in your career and often fill it with things you love but put off because you lack the time or resources.

Working past 65 is no longer the exception. The Commonwealth Fund reports that 66% of workers over 64 are employed full-time often because they do not have the financial reserves required to retire.

The trouble is that not everyone gets to retire on their terms. An economic downturn, business failure, or pandemic can lead to a late-career layoff preventing you from finishing your career as planned. COVID-19 has been particularly harsh on older workers, who face a higher risk of death, above-average levels of unemployment, and are more likely to lose employer-sponsored health insurance.

In 2020, the coronavirus pandemic put 1.1 million seniors 65 or older out of work, making up 13% of the population in that age group. These figures do not include those who closed businesses, officially retired early, or lost income due to the pandemic.

Experiencing a late-career layoff means more prolonged periods of unemployment and often reduced pay if you can find a job. These factors can permanently reduce lifetime income, especially in retirement.

If you are compelled to retire early and wonder how you will manage financially going forward, consider taking the following steps.

Control Expenses: Immediately look for ways to trim costs. Convert to an emergency budget that minimizes expenses until you have a long-term financial plan in place.

Identify Current Income Streams to compensate for the lost income. Will you receive a severance package, do you qualify for unemployment, or can you complete gig work like driving for Uber or delivering meals? Even temporary income will give you time to set your retirement plan in motion.

Put Long-Term Income in Place: Review your finances. Do you have retirement investment funds, Social Security, or a pension that will provide ongoing income? Compare the payout if you began receiving benefits today or wait one or more years. Also, consider how long your temporary income will last? You are often better off using unemployment to delay taking retirement benefits. Especially if beginning benefits immediately would result in a permanent reduction in your monthly income.

Assess Your Financial Needs: Compare your long-term income with long-term expenses to see where you stand. Ideally, you want to delay tapping retirement savings, or you should have enough income to continue saving because of high health care costs later in life.

You might need to take more drastic steps to lower costs if you still face a gap between income and expenses. Reductions might include eliminating a vehicle, moving into a smaller home, or transferring to a less expensive area.

If you find you do not have enough income to cover all your expenses, you may qualify for a debt relief program. Enrolling in debt settlement could provide immediate payment relief on unsecured debts like credit cards or medical bills. The program will also help you eliminate debts without paying the full balance owed.

When you face financial hardship, a debt settlement company can negotiate with creditors to create a new payment plan that could save between 20 and 80% of your current balance. Learn more about how debt settlement could bring you relief from high-interest debts if you are forced into early retirement here. (LINK)