Working primarily with individual employees, I am often asked “How much should I start putting away for retirement and when should I start?” My answer is always the same. Save as much as you possibly can and right now. But what happens when you did not plan to retire early, and you find yourself exiting the workforce? Whether its a layoff, the need to stay home with loved ones or a business closing the doors, you need to have a plan for what happens next.
Start with putting your monthly income in an Excel spreadsheet or just putting pen to paper. Make sure you are including pensions, investment returns, social security, annuity payments and even real estate income. Then list what your expenses will be. Once you have everything written down you can decide what you can cut out or if you will be able to sustain your lifestyle. Keep in mind, just because you are retiring early doesn’t necessarily mean you need to take your Social Security early or turn on the faucet of your pension plan. That conversation should take place with your financial advisor and then come up with a plan that works for you.
Now is also a good time to take a closer look at your needs vs wants. Look at your bank statements and credit card bills. See where the unnecessary spending is and start cutting back. Make it a realistic plan and not one that will set you up for failure. One way to evaluate what your needs vs wants are is by creating a spending plan. Being able to differentiate the two and what really matters the most to you, will help you identify more clearly those things you cannot live without.
Just because you do not have the job you once did, you have a lifetime of experience at your fingertips. Try getting back in the workforce part time or even try consultant work. If you have never considered this alternative way for income before, now is the time. Establish a LinkedIn account and start promoting yourself on professional platforms. Reach out to former colleagues or business contacts to get a feel for what changes are happening in your industry and how your skills can meet that demand.
Set up meetings with all of your advisors. Schedule a meeting with your financial advisor and ask if your investment strategy still aligns with your goals. With the unexpected change in your retirement timeline, this question is imperative for planning “what’s next”. Look at your portfolio and make sure that it is properly allocated. Ask about the changes in your taxes this year and if your investments will affect them. You should also speak to your accountant and estate attorney when a major life events, such as early retirement. Ideally, all your advisors should be on the same page with your financial future. Having a team that can help you navigate through the complexity of early retirement is extremely beneficial.
While we cannot predict the future when it comes to being forced into early retirement, we can do things to make it easier. Having a strategy in place will better prepare you for if it does happen. Call your financial advisor today and schedule a time to discuss all your options.
We’re here to help. Info@CPSInvest.com
Tamara L Fales
Retirement Plan Specialist