Some of my friends aren’t worried about saving for retirement. They believe they will never have enough and instead trust in the “I’ll work until I drop” plan. While this may work out for some, what happens if you are downsized or suffer a health event and can no longer work?
Look at the specifics
Before making a decision to retire, think about where you are. If you were laid off due to COVID and are in your mid-50s, can you find another job, even if only part-time, to keep money flowing in? Would you be comfortable making the rapid switch from sitting in an office to working in a warehouse for one of the major online sites? Or perhaps contacting some of your past clients and becoming a freelancer?
Was your unexpected retirement due to an injury? If you build houses and injure your back, the physical stress may truly require you to stop doing what you’ve done for 40 years. But is there another job that isn’t as demanding that again, will keep the money flowing in? Can you move into a supervisory position, perhaps start acting as a general contractor, or even evolve into a home inspector? What about online – teaching, answering questions, making videos of simple home how-to jobs? Or maybe you start working part-time at a home improvement store or switch into an office job that’s much less physically taxing.
Take a financial snapshot
While you’re considering if or how you can find another job, take the time to see where you are financially. What do you owe, what do you have, and what are your immediate needs? Can you use insurance – whether unemployment or disability – to keep enough money coming in while you make a decision on what to do next? Were you able to negotiate a severance when you were laid off?
Can your partner work (if they aren’t) or take on a little more in the short term to help offset your loss of income? Maybe they can be available for more overtime for the next few months or pick up a weekend job.
Look at ways to save money immediately whether through canceling subscriptions or renting out the basement. Do you have extras sitting around that you can sell (clothes, computers, cars)? What can you quickly turn into money?
Review – or start – a budget. This isn’t the time to let money slip through your fingers. If you already have a budget, identifying the extras you no longer need should be easy. If you don’t, start tracking your spending and cut as much as you can to make your money last longer.
Social Security
If you are 62 or older, you may want to consider taking Social Security. At the very least, you should contact the Social Security Administration (either phone or online) to get an estimate of your monthly benefit if you start collecting. But remember two things: the benefit you receive from Social Security at 62 is less than your benefit at full retirement age; also, Medicare doesn’t start until you’re 65.
Consider your home
I mentioned renting out part of your home. If you’re in a desirable area, what about renting out your whole home and moving to a less expensive option? If you live in an expensive city, consider moving out to the suburbs where you can still drive in to enjoy city life but save money at the same time. Or you may want to sell your home and downsize. Not only could you save on the mortgage payments if you buy a cheaper property, but utilities should be less each month in a smaller house.
A sudden retirement may not be what you’ve planned. But take the time to consider all your options, both for ways to increase your income and decrease your spending. Maybe not working “until you drop” will end up being a blessing in disguise.
Photo by Yury Kim