Yahoo Finance Lost Your Job 10 Years Short of Retirement? How To Finish Saving Without Getting Another One
Retiring early is sometimes not a pre-planned option for many Americans. According to a TransAmerican Institute survey, about 17% of workers retire sooner than originally planned due to various reasons like job loss, health needs or physical limitations.
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Losing a job, especially close to retirement, can lead to a lot of uncertainty but it’s important to assess your current situation thoroughly to determine the best steps to take moving forward. Here are a few key things you should do if you find yourself out of work several years before your planned retirement age.
Run the Numbers
The first step in any financial recovery plan is understanding your current situation. You need to take an in-depth look at your savings, investments and the reality of your monthly living costs. Sit down and pull together the numbers on all your accounts, including 401(k) plans, IRAs, savings and any liquid assets.
Next, calculate your monthly expenses, looking at both necessities and discretionary spending. Now that you know exactly what you have and what you need, you can make a clear-headed plan.
One Reddit user was laid off at the age of 60 and wondered if he and his wife (who was 54 and not working) could retire at that moment since he preferred not to go back to work. After running the numbers, he found he had:
401(k) valued at $740,000;
$200,000 in savings (placed in a CD at 5.5%);
$12,000 in liquid cash in various checking accounts;
No personal debt;
Severance package — which would cover his living expenses through the current year of this layoff.
In terms of his monthly expenses, he has:
Housing – $1,350;
Health insurance for he and his spouse – $939;
Other insurance – $200;
Car insurance – $112;
Utilities, phone bill – $400;
No vehicle debt.
Calculate Your Social Security Benefit
Social Security benefits are a crucial piece of the retirement puzzle. You likely know that the longer you wait to start taking them (up to age 70), the more you get. But it’s also essential to understand that you can begin to receive reduced benefits once you turn 62.
You can visit the SSA website to calculate your estimated social security benefit amount and add that into your budget. For our Reddit user, he found out his benefit was going to be around $2,300 per month if he started using it the year following his severance package.
Consider the 4% Rule
The 4% rule is a guideline that suggests withdrawing no more than 4% of your retirement savings in the first year of retirement, and adjusting the dollar amount for inflation each year thereafter. Developed in the 1990s, the rule is based on historical performance data that suggest a balanced portfolio of stocks and bonds will provide that amount without running out over a 30-year retirement.
While it’s important to remember that it’s not a one-size-fits-all rule, it provides a safe framework for using your accumulated savings without depleting them too quickly. To adjust for current times, you can be more conservative and choose a lower figure such as 3% or 2%.
Consider a Flexible Side Hustle
The example given by our Reddit user would yield him around $67,000 annually to live on if he chose not to get another job and retired now. But if this isn’t enough for his lifestyle or he can’t cut expenses any more currently, there is always the option to consider a flexible side hustle.
A side hustle doesn’t have to be a second full-time job. It can take many forms, from consulting in your former career to starting an online business. The key is to find something you enjoy and that offers some financial upside. This can not only provide money to supplement your expenses, but also a sense of purpose and structure, which is especially important during a period of transition.
Learn More: 6 Ways To Lower Expenses in Retirement While Still Living a Luxury Lifestyle
As you can see in this example, losing a job is undoubtedly a significant challenge, but with careful planning and a proactive approach to your finances, you can still achieve retirement. The key is to assess your current financial standing, ensure you’re making the most of your benefits, follow sensible withdrawal guidelines, and stay open to new opportunities.
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This article originally appeared on GOBankingRates.com: Lost Your Job 10 Years Short of Retirement? How To Finish Saving Without Getting Another One
