Is COVID-19 Driving Your Early Retirement Decision?
Does the pandemic make you think about an earlier retirement?
Due to the COVID-19 crisis, many employees who are able to perform their duties remotely have transitioned to working from home. This has offered a glimpse of what retirement might look like for them — minus the work load, of course.
For example, many remote employees are enjoying more free time since they no longer have to commute back and forth to an office. And they have more flexibility to take care of routine tasks and chores that arise throughout the day, whether it’s meeting a repairman at their home or helping their kids with remote learning.
Changing views of retirement
These new work-from-home experiences are changing the way some employees view retirement. Here’s one example: In a June survey of approximately 300 individuals age 55 and over conducted by investment strategist Wes Moss, who hosts a radio show about personal finances, a quarter of respondents said they plan to keep as much of their lockdown lifestyle as possible after the pandemic ends.
Some corporations are offering employees early retirement packages in an effort to cut costs and align their workforce with lower, pandemic-era demand for their products and services. Such a package may serve as an added incentive for an employee who’s nearing retirement to make the leap now.
Four factors to consider
If you’re thinking about accelerating your retirement date, there are several different factors to consider, including:
- Do you have enough savings to support an early retirement? Without adequate financial resources, you could deplete your retirement savings early and possibly have to return to the workforce later. Be sure to factor all sources of retirement income into the equation, including your IRA or 401(k), Social Security, a company pension plan (if you have one), real estate holdings, anticipated inheritances and an early retirement package if you’re offered one. But remember: You typically can’t start receiving Social Security retirement benefits until you turn 62, and it is often wise to delay the start date to increase the monthly benefit.
- Are you emotionally prepared for retirement? Nonfinancial aspects of retirement, such as emotions, can be just as important as financial considerations. For example, does your social life revolve around friendships and relationships at work? And how closely are you defined by your job? Some retirees struggle with their identity after they leave the workplace, so give this some careful thought.
- Have you pictured what retirement looks like for you? How do you envision your retirement lifestyle? For example, do you want to travel to exotic locations or spend time with your children and grandchildren? Or are there hobbies and interests you’d like to pursue? It’s important to plan for how you’ll spend your days in order to stay busy and mentally sharp. This includes replacing the socialization you experienced while you were in the workforce.
- Do you want to work part-time in retirement? This can not only help you stay busy after you retire, but it can also generate extra income that could help your retirement savings last longer. Retiring earlier than you originally planned might also allow you to launch that new business you’ve always dreamed about but never could squeeze in while you were working full time.
Talk to your loved ones
Accelerating your retirement date is a big decision that will have major repercussions on every area of your life. Be sure to discuss it with your spouse, other close family members — and ask one of our financial advisors — before taking the leap.