Are you planning to work past age 65? Possibly even into your 70s? You’re not alone. According to a study from Transamerica, many baby boomers are banking on that strategy. The study found that two-thirds of baby boomers are planning to work past age 65. And 15 percent say they plan on never retiring. Of those who plan on working past age 65, two-thirds say their plans are due to financial reasons. They either haven’t saved enough, need the health coverage or need the income.1
If you’re behind on your retirement savings, you may feel that delaying retirement is an effective way to bridge the savings gap. When delay retirement, you give yourself a few more years to contribute to your retirement accounts. You also get to delay Social Security benefits, take advantage of employer health coverage, and eliminate a few years of retirement that would have to be funded with distributions from your savings.
A plan to delay retirement may not be effective, though. You may not get to decide when you retire. According to a study by the Employee Benefit Research Institute, nearly half of all retirees say they were forced to retire earlier than they had planned.2
Forced early retirement is a reality for many workers. And if you are forced to retire sooner than you’d anticipated, you could face sizable challenges.
Do you have a backup plan in case you’re forced to retire early? If not, now may be the time to develop one. Below are a couple of common reasons why people are forced to leave the workforce early, as well as tips on how you can manage the risk:
Think disability won’t happen to you? Think again. According to the Council for Disability Awareness, Americans on average believe that they have only a 2 percent chance of becoming disabled. The reality is that the average worker has a 25 percent chance of suffering a long-term disability.3
As you age, it’s natural to assume you may be more vulnerable to injuries and illnesses. It’s possible that you could suffer an injury or illness that limits your ability to work. If that happened, how would you support yourself and your family?
You can protect yourself against this risk with tools like individual disability insurance. You pay premiums for the insurance today, and in exchange, you’ll receive a benefit to support yourself should you ever become disabled. While your employer may offer disability insurance and Social Security sometimes covers disability, you may find that the coverage under those programs is insufficient to meet your needs until you retire.
The possibility of losing your job to layoffs or restructuring may be something you don’t want to consider. However, it’s a possibility in any industry. Even in healthy economic times, organizations are always looking for ways to become more efficient and streamlined.
Again, consider what the consequences may be if you were to lose your job a few years before your planned retirement date. Do you have enough assets to support an early retirement? Would you be able to find a new position?
There are several steps you can take to minimize this threat. One is to keep investing in your skills and abilities, so you stay valuable to your employer and potential new employers. Another is to build a sizable emergency reserve fund, so you have assets to bridge the gap between job loss and retirement.
Ready to develop your backup plan for forced early retirement? Let’s talk about it. Contact us at Focus Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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This material is provided by a third party, and sources believed to be reliable, however, accuracy cannot be guaranteed. The opinions set forth in this video are that of the person speaking in the video, not that of Stover, FFG, or TCM Securities, Inc
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