Senior Tips – Best Financial Steps to Take When You Are Forced to Retire Early: A Guest Post by Alana Downer
Retirement confidence is at an all-time low with employees working later into their life in the hope that they don’t outlive their savings. A recent Australian report found that 51% of retirees expected to outlive their savings. Because of stats like these, people are aiming to work longer and harder to ensure a comfortable retirement, however this isn’t always the reality. A 2015 study from the Employee Benefit Research Institute found that in 2013, 47% of workers were forced to retire earlier than planned.
Forced early retirement can be more common than you might think. There are many factors which can contribute to an early retirement, among other reasons these include, job loss, loss of stamina or poor health. So, what should you do? Whether as an employee faced with early retirement, or a carer who knows someone forced into an earlier retirement? Here’s our best financial steps you should consider taking:
Assess your cash flow and income:
Your first step is to not panic! All too often people think cancelling their gym membership will help them. This small weekly or monthly fee won’t see the quality of your retirement improve drastically and going to the gym is great for your health.
Instead, what you should do is list your monthly income and expenses. Consider what benefits you can receive now that you are a retiree. Look at your health, car, life, and other insurance plans and see where you can make some savings. You may also qualify for involuntary unemployment cover. Track all your monthly expenses and know how much money you need exactly for one month. From there you can estimate how long the money you have saved will last.
Create a retirement plan:
A retirement plan is something you should be working on before you are retired, but if an early retirement has come suddenly and you find yourself without one, it’s not too late to set one in motion. You can base your plan around either retirement goals or create a cash-flow plan.
A cash-flow plan is based around investments, income and expenses, and making assumptions about inflation and how you will be able to spend throughout your retirement.
A goal based plan lets you plan major events, trips and really anything you want to achieve during your retirement. This is a good system as you can prioritise what you want to do, understand the associated costs and foresee what and how much you will be able to do.
Look for alternative ways to create income:
If you find yourself in need some extra income, or you just want to use your time to cover some expenses so you can take that retirement holiday a little sooner, there are several options you could consider.
A popular approach with some retirees is to begin trading. In recent years trading on the Forex market has become a largely successful approach to profitable trading. Of course, this takes some time to learn as there are certain strategies which must be used.
Other options include finding part time work. Maybe you love gardening, use the forced retirement as a time to pursue any careers you might be passionate about, even if they aren’t as serious as your previous full-time career.
Consult with a professional:
Retirement can be difficult to plan for, even at the best of times. Unexpected things can happen and you want to ensure you have enough money to live out your retirement comfortably and even enjoy it.
Meeting with a financial adviser can help you take specific steps towards a better retirement. They can help create budgets, suggest where to invest your money and build a financial plan that suits your specific situation.
Also, think about your pension and how you want to receive it. The rate will change depending on your status, so it’s important to ensure you understand what you are eligible for.
The key to overcoming a forced early retirement and the associated financial challenges is planning. These steps are a great start to planning your retirement and can help you to achieve any retirement goals you have in mind.
Alana Downer is a financial blogger and a part of the team behind Learn to Trade, a source of educational information for traders and investors. Having been always interested in achieving financial freedom, Alana might often be found sharing her strategies online with all those who wish to earn money on the side and become financially independent.
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