Do You Lose Benefits If You Retire Early?
Not everyone retires because they want to. A lost job, serious illness or large life change could put you into an early, unwanted, retirement. A recent article from USA Today titled “Forced to retire early? 3 things you can do to put off filing for Social Security” explores the options.
The first thing most people think of is taking Social Security benefits before Full Retirement Age (FRA), which has long-term consequences. The idea seems logical: by taking benefits, you’ll protect your retirement nest egg. However, you’ll receive a lower monthly benefit for life. Instead, consider a few alternatives.
Pursue a part-time job. If finding a full-time job doesn’t work, or if you aren’t physically or mentally able to work full time, a lower-stress part time job could fill in the financial gaps. Employers are eager to find qualified workers, in all kinds of workplaces. You might score a remote part-time job, which would be ideal if mobility is an issue. You may prefer a position where you interact with the public, like the greeter at big box stores. If you’re savvy enough to score a high paycheck, you might be able to get by on a different income level, while letting Social Security benefits grow.
Revise your spending significantly. Take a look at your cashflow. If you’re in a hot housing market, can you sell your current home and move into smaller quarters? Does your family still need two (or three) cars? If you’re among the average Americans who dine out at restaurants several times a week, a return to eating at home could help your budgeting. How many streaming services are you paying for every week?
In some instances, you can’t cut spending, especially for medical care. However, chances are there are some cuts you can make to help trim spending and reduce the withdrawals from retirement accounts, including IRAs, SEPs or 401(k)s.
Can your home create income? Monetizing your home can take a few different forms. Today’s reverse mortgages are not the same as they were thirty years ago. Depending on how much equity you have in your home, you might find the monthly checks help avoid having to take Social Security early.
Could you take in a roommate to help with monthly bills? Obviously, this step requires a lot of thought. However, if an additional $500 would tide you over, it might be a viable option—and you may enjoy the company. There are non-profit organizations that pair seniors with roommates. There are also online apps for people to rent out their fenced backyards by the hour to dog owners who need a safe place to play with their pets.
Knowing there are options can make financial stress a little less overwhelming. Do your homework and find what works for your situation.
BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.
If you liked this article, “Do You Lose Benefits If You Retire Early?” read also these additional articles: Can Estate Planning Reduce Taxes? and Addressing Property in Another State in Estate Planning and What Should I Know about Burial Insurance? and Does Potential IRS Change Have an Impact on Estate Plan?
Reference: USA Today (June 26, 2022) “Forced to retire early? 3 things you can do to put off filing for Social Security”