Plan for the worst
Are you planning to work past traditional retirement age so you can shore up your savings? That could be an effective strategy. Working later in life gives you a few more years to save money, and it also may let you delay Social Security, which can increase your benefit amount.
Many workers have a similar strategy in mind. According to a study from Transamerica, two-thirds of baby boomers are planning to work past age 65. In fact, 15 percent of baby boomers say they will never retire. Why the strong desire to work past traditional retirement age? Most say they will work late into life because of financial reasons. They believe that working longer will help them overcome their retirement savings gap.
Unfortunately, retirees don’t always get to decide when they’ll leave the working world. In fact, a study from the Employee Benefit Research Institute found that nearly half of all retirees are forced to retire earlier than they had planned.
As you might expect, a forced early retirement can have a sizable impact on your financial stability. When you are forced to retire early, you lose working years in which you would have contributed additional funds to your retirement accounts and you create additional retirement years that you may have to fund with distributions from your savings.
Do you have a contingency plan in place for forced early retirement? If not, now may be the time to develop a plan. In an ideal world, you would choose the age at which you retire. However, it may be wise to have a plan in place in case you don’t get that option. Below are a couple of reasons why you could be forced to retire early:
It’s natural for health issues to become more prevalent as you advance in age. The truth is, though, anyone of any age can suffer a disability that requires them to take a prolonged absence from work or to leave their career altogether.
In fact, the Council for Disability Awareness estimates that 1 in 4 adults in America will suffer a long-term disability at some point in their career. The group also has found that the average worker estimates having only a 2 percent chance of suffering a disability. The reality is the average worker has a 25 percent chance of suffering a disability.
The good news is there are steps you can take to protect yourself from the financial burden that comes with disability. You may want to consider an individual long-term disability insurance policy, which could provide you with supplemental income until you reach retirement age. You also may want to create an emergency fund that you could tap into if you’re forced to leave your career early because of health reasons.
No matter what business or industry you’re in, the risk of job loss is always present. The economy changes very quickly. Even in strong economic cycles, businesses look for ways to streamline and become more efficient. What would you do if your position got eliminated and you were unable to find a new job?
Again, there are steps you can take to minimize this risk and the financial fallout. One is to keep investing in your skills and excelling in your career, even if your retirement is approaching. By making yourself more valuable to your employer, you may minimize the risk of being laid off. Also, an emergency reserve fund would be helpful in this scenario as well.
Ready to develop your backup plan? Let’s talk about it. Contact us at Milestone Coach Advisor. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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