June 2, 2014

Greetings! I trust that this finds you well and enjoying life.

You may have heard the saying, “Life is what happens to you while you’re busy making plans.” That’s a line from a John Lennon song entitled, Beautiful Boy. It’s also a keen observation of what could happen if you focus too closely on one specific goal and don’t make contingency plans.

This phenomenon is all-too-common when it comes to planning for retirement. We get focused on what we want to do in retirement, our lifestyle goals, and ways to help us reach a certain dollar amount that we believe will allow us to achieve those objectives. But being prepared for the “unknowns” can be just as important as being prepared for identified goals. And one of those “unknowns” may be retiring ahead of schedule.

These days there are many reasons why people may have to stop working sooner than originally planned. For many there may be health reasons – a medical condition that makes working at their current job no longer an option. Others may find that the demands of taking care of an aging parent are too overwhelming, and they must cut back the number of hours in their work schedule or retire altogether to have the flexibility necessary to meet those needs.

Still others may get forced out of the workplace due to layoffs or replacement by younger workers with a stronger technological skill set at a lower salary level.

If you do find yourself in a situation where you feel you must retire sooner than expected, check out your company’s polices regarding early retirement. Some companies offer programs with incentives and benefits of which you may not be aware. Next, if you don’t have enough savings to retire in the manner you had imagined, think of ways you could adjust your lifestyle to accommodate more humble means.

Also consider the possibility of getting another job – either full-time or part-time. Even a part-time position can help defray your cost of living, and it may prove an excellent way to ease you into the retirement lifestyle. Some lifelong workers find it difficult to stop working abruptly, so part-time work may be a way to keep you socially engaged and your mind active. You may be able to dovetail your previous work experience into a consulting role or similar work in your field. Or, if you go into a new line of work, seek out a position in an area that interests you, or that may provide good benefits in terms of employee discounts. Either way, it’s a good idea to develop a line-item budget that details the amount of money you can live on in this new situation.

If you were to get another job, consider whether you should keep your current retirement account with your former employer or roll it over to a new employer or an IRA. The early retirement transition may be an excellent time to consider meeting with a financial professional about how to position your current assets for your lifestyle needs and future income. For example, if you still owe money on your mortgage, you may wish to compare the advantages and disadvantages of liquidating some of your assets to pay off the loan. However, consider that while this may help lower monthly expenses, you would lose the mortgage interest deduction on your taxes – which could be important if you get another job.

Just because you retire early doesn’t mean you have to eliminate all the things you wanted to enjoy in retirement – you may simply need to be a little more resourceful and/or patient about how to achieve them. For example, if you were looking forward to spending your days on the golf course, consider passing up an expensive country club membership and instead mastering the public courses in our area.

If you wanted to travel during retirement, this still may be an option depending on where you want to go. Consider trips where you can stay with friends and family and visit points of interest local to them. If you have a specific place you want to go, consider forgoing other vacations for a couple of years so you can save up for the big one.

If it was your lifelong dream to start your own business in retirement, early retirement needn’t thwart your goals. Consider looking for a partner who shares your passion and can put up part of the money to get the business off the ground.

If you have questions or concerns about anything related to finance, don’t hesitate to call.

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