Q: I’ve received an “early retirement” package from my company and have only 60 days before I’m off the payroll. I’m not sure if I can truly afford to retire, but I really don’t have any choice in the matter. I’m 61-years old and was expecting to work a few more years. What are the main things I should be focusing on? - Sheldon
A: Your situation is far too common. You’d like to keep working for a few years, but your employer would like to see you retire (maybe so they can replace you with a less expensive employee).
According to a recent study by Voya Financial, roughly 58 percent of Americans will be forced to retire sooner than they had planned. Many of these folks retire because of a severance or early retirement offer from work, and are only given a 60-day notice, just like the position you are in.
Here are some things you should be doing now in order to prepare for your retirement in two months:
- Restructure your mortgage. If you have an existing mortgage on your home, you’ll want to restructure it for the lowest payment possible. Ideally, your home is paid off by retirement, but if you are not in that position, consider refinancing it into a new 30-year mortgage in order to reduce your payments.
- Get rid of your consumer debt. You may have a car loan or some credit cards. If so, it’s best to try and wipe these out before you move into retirement. If you have the cash to pay them off, by all means do so. If you do not, look into ways to reduce the required monthly payments.
- Develop a strategy for medical insurance. This is a biggie for those who retire under age 65. If your employer will provide you with retiree medical, that’s fantastic (but that’s becoming less and less common). If they won’t, because medical insurance can be very expensive, it may actually prevent you from being able to retire. I strongly suggest you check into your options now. If you can’t afford to purchase medical insurance, you may be forced to find another job until you can apply for Medicare at age 65.
- Make a plan for your 401(k). Your employer’s 401(k) offering may be an excellent plan with many low cost options, so it may make sense for you to keep it where it is. However, if you need guidance with your investment options, or you’ll need to generate monthly income from the plan, you’ll want to identify a financial advisor (or investment firm) and establish an IRA rollover account, along with a game plan for those dollars.
- Look into your life insurance. You probably have some sort of life insurance that is offered through your employer. What happens to that once you retire? If you still need some life insurance and are in good health, you’ll be able to purchase a new policy outside of work. But if your health is not ideal, you may want to see if you can continue with your employer’s life insurance. Costs typically rise if you do, but it may be worth it if you cannot buy life insurance on your own.
- If you have one, decide about your pension option. Most of us will retire without any monthly pension from our employer, but you may be working for a company that still provides a traditional pension. If that’s the case, you’ll have to decide between a pension that only pays during your lifetime, or one that continues on and protects your spouse. This is an important decision, and one that is irrevocable, so you don’t want to take it lightly.
- Seek professional help. You’ll want to engage the services of a quality CERTIFIED FINANCIAL PLANNERTM to determine whether or not retirement is truly feasible, and to help you make the best available decisions during this short window of time. My experience has been that the sooner one meets with an advisor, the better.
Of course, there are other important factors that play into a smooth retirement transition. If each retiree considers the 7 most important personal decision points, I’m confident they’ll head into retirement prepared.