By Debra May
As the world edges toward recession, it’s clear that retiring in such volatile circumstances requires a more flexible, creative approach. If you want or need to stop working in the next 2-3 years, giving up your paycheck can be anxiety-inducing, especially if your portfolio has lost significant value. You might see life with less money and uncertainty and are thinking of postponing your retirement.
Still, there may be compelling and logical reasons to stop working or reduce your hours, such as health issues, family problems, or a toxic work environment. You might be forced to retire, even if you don’t want to. Indeed, retirement could be your best, even your only, way forward. A well-thought-out exit strategy will go a long way toward helping you leave the workforce with less stress and more options.
If you feel you want or need to retire during an economic downturn, there are a few steps you can take to make the process more efficient.
- Sit down with your retirement income advisor and review your portfolio. As soon as you decide you are ready to retire, set up a meeting with your retirement income planner. You can check your investment matrix using retirement planning calculators and other tools to determine what adjustments you can make to ensure you have enough income.
- Pay off as much debt as possible. Crushing debt loads are responsible for the failure of many Americans’ retirement plans. If you have debt, you want to consult your financial advisor about how to redirect your income to pay these bills. Debt is not your friend when you no longer get a paycheck, especially in a rising interest rate environment.
- Lower your living expenses. Many seniors consider downsizing or moving to states with fewer taxes or lower energy costs. Inflation may make lowering your cost of living even more imperative. Before you commit to moving or selling your home, be sure you’ve done the research and due diligence. The grass may not be much greener elsewhere.
- Discover your work options. If your decision to retire is based on health or stress issues, you should consider your options. For example, you could reduce your hours or find a less physically taxing position instead of quitting and having to dip into your retirement savings. Sometimes, you have accumulated PTO you could use to give yourself additional days off. If you’re thinking of retiring due to workplace conflicts, discuss this situation with your HR department. Taking retirement before you are ready should be avoided, especially if you enjoy what you do.
- Develop side hustles and gigs to supplement your income. Whatever your financial situation, having an additional income stream is always beneficial. Many retirees have hobbies or skills they can turn into revenue, so they won’t have to draw down their retirement accounts as quickly.
- Review your Social Security plan. One of Americans’ most crucial financial decisions is deciding when to start taking Social Security. Although most experts recommend waiting until full retirement age (FRA) to take Social Security, that may not be the best advice for everyone. Your situation is unique, depending on a variety of factors. Talk to your advisor now to discover your options and the implications of each.
- Determine your healthcare needs and how you’ll pay for those needs. Healthcare costs are one of the top reasons retirees run out of money when they stop working. Many Americans take it for granted that Medicare will cover all their medical expenses once they’ve retired, but this is not the case. You probably know an older person who had an unexpected illness or injury in retirement and got bills for the portion not covered by Medicare. For example, Medicare will pay 100% for only the first 20 days of your covered stay in a skilled nursing facility. After that, days 21-100 require a co-pay of $200 per day. If your visit extends beyond 120 days, you’ll be responsible for the entire bill.
Summing it up: Retiring in a recessionary environment isn’t impossible. But, you will need to do as much planning as you can, as far in advance as possible. Leaving anything to chance in a volatile economy is unwise. Call your retirement and income expert now to discover what you need to do to stay solvent and sane during the coming meltdown.