What to Know About Early Retirement During COVID-19

What to Know About Early Retirement During COVID-19

Are you considering retiring early? If so, you aren't alone. In fact, many Americans have chosen — or have been forced into — early retirement due to COVID-19.

Retiring is a big decision, regardless of the circumstances. Before you make your final decision about when to retire, consider the economic, social and health factors that might lead someone to retire early today.

The Economic Impact of Early Retirement

Retiring due to the coronavirus means no longer having a steady paycheck coming in from an employer. Instead, retirees depend on withdrawing a regular fixed income from their savings, retirement accounts, company pensions and/or Social Security payments.

Depending on your financial resources, retiring sooner could mean tightening your financial belt, or at least becoming more mindful of spending. However, you might discover that you are indeed in a position to retire ahead of your original plan from a financial perspective.

If you retire before your "full retirement age," which is determined by your birth year, you will receive less Social Security than you would have if you had waited until your regular retirement age. However, experts generally agree that Americans in their 50s and 60s today likely won't see a Social Security benefit reduction, but younger generations could see reductions down the road.

Social and Health Factors

In August, a report from the Joint Economic Committee of Congress found that many workers in "frontline professions," such as janitors and home health aides, are close to retirement age and more likely to be exposed to COVID-19.

Retiring before you planned to do so could make sense from a health and social perspective if your job puts you at a higher risk of contracting COVID-19 and spreading it to your household members, loved ones or friends. At the same time, choosing to retire sooner could curtail social interaction substantially for single workers or workers with many friends among their co-workers.

What to Consider Before Making a Decision

How might retiring early due to the coronavirus affect your life? Ask yourself the following questions:

  • How will drawing income from savings before I expected to do so impact my retirement account balances and investment portfolios?
  • What are my options for accessing an early company pension payment?
  • How could expected interest rate changes influence my decisions to make withdrawals from my retirement account?
  • Does anyone in my family or household have an immunity-compromising condition?
  • Does my work put me or my loved ones at an increased risk of coronavirus exposure?
  • How would retiring early affect my mental and emotional health?
  • Would the savings from staying in my current home during retirement instead of moving to a retirement community help me fund an early retirement?
  • How can I stay socially connected to others during retirement?

Understanding how you will address these considerations may help you decide whether now is the right time for you to retire.

Maintain a Positive Mindset

Retirement can be a wonderful stage in life and may provide the opportunity to pursue activities you didn't have time for when you were working. Many retirees take up new hobbies, attend to long-delayed projects, and deepen relationships with friends and family. Although face-to-face contact may be restricted currently, today's retirees have more options for connecting through technology than ever before.

Only you can decide whether retiring early due to COVID-19 is right for you. Consider your work, home and health situations, and talk to your spouse and your financial advisor before making the decision to move to this new lifestyle.

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