5 ways to handle a surprise retirement

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Retirement often catches you by surprise. The majority of workers retire years earlier than they planned, surveys show. Health issues, caring for family members, and corporate restructuring are the top reasons that people end up leaving the workforce before they expected. Retirement can induce nervousness and stress even when you’ve planned for it. When it’s thrust upon you, it can leave you fearful, anxious, and possibly depressed. Early retirement isn’t a picnic, but with a few prudent measures it can be managed successfully. Here are some suggestions.

Start planning in advance

By the time you get within a few years of your target retirement age, you should have a plan for your retirement. People who enter retirement with a plan, possibly in consultation with a financial advisor, have a much higher chance of a satisfying retirement. Even if you end up retiring a couple of years before you’re ready, having a plan ensures you have an idea of what you want to do in retirement, and what your expenses and income will be.

Remember that retirement is as much a psychological change as a financial one. As you prepare your retirement budget, you should also prepare mentally for leaving the workforce and going it on your own. In that way, you’ll be better prepared to make good decisions and to start your new life, whenever it happens.

It may be that your retirement income level isn’t quite up to what you’ll need. In that case, you can either downgrade your lifestyle, or find ways to produce more income. Unless your health is deteriorating, a second career is an attractive and popular option. Many people leverage their expertise and contacts developed over a long career into a consulting gig, or even a small business. Maybe a side skill or hobby you’ve acquired can be a source of income. Or you can earn a certificate to prepare to enter a new field. And many companies are always looking to hire parttime workers. A Merrill Lynch study found that retirees who continue working are more stimulated, connected to others, and have a sense of pride, compared to those who don’t.

Know your Social Security benefits

On the subject of income, you will want to know about your Social Security retirement benefits and work out a strategy to maximize your benefits, again possibly in consultation with an advisor. This is particularly important if you continue working past your Social Security full retirement age. Although you may be tempted to start taking benefits right away if you’re eligible, it may be in your interest to delay to full retirement age or even age 70 in order to receive a significantly higher benefit.

Take advantage of government benefits

If you were laid off you may be eligible for unemployment benefits. If you had to leave your job because of illness or injury, you may apply for Social Security disability benefits and state benefits. If your income is below a certain level, you may also be eligible for Supplemental Security Income, Medicaid, and SNAP food benefits.

Tap into your home equity

If you own your home, you might consider using home equity to generate cash. A home equity loan, home equity line of credit, or cash-out refinancing are emergency options if needed to meet basic living expenses. You can also consider a reverse mortgage to generate retirement income. Reverse mortgages come with many conditions and aren’t right for everyone, but for many people are a way to make up for a cash flow problem.

Consider other ways to generate cash

If you have extra room in your home, you might consider renting out part of it, long-term or short-term through sites like Airbnb. You might have misgivings about having a stranger live in your home. Talk with friends who have experience doing this and see what they think. Obtain personal references and consider getting a background check before executing a rental agreement. If you have valuable items or electronic appliances that you’re not using, you can consider selling those. You might even consider downsizing your home by moving to a smaller residence or less expensive neighborhood or state.

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