By Craig Erwin, Ph.D.
My dad lost his job at 52, and my brother-in-law lost his in his 40’s. Many get blindsided by job losses, no matter their age. The problem with losing your job in your 50’s, though, is that it can be very difficult to find a new job. Although it is illegal to discriminate based on age, it happens all the time. That often makes it more challenging to find a job in your 50’s than in your 20’s. What happens when people lose jobs in their 50s? Frustrated with dead end job searches, they often end up retiring early. This can result in serious problems if they are financially unprepared to retire. If one retires a decade earlier than planned, she might well run out of money in her 70s, with many more years to live.
Every year that you can delay retirement makes a big difference because it’s one less year you will have to use your retirement savings to cover living costs. If you retire a year early, that’s one extra year that you will have to use your retirement savings to cover expenses, but didn’t plan to. Financially, there is a big difference between retiring a year earlier than planned and a year later than planned. You need to do whatever you can to avoid retiring early, and, if possible, you should try to retire later than you planned, so you have more time to save. Of course, if you have millions saved for retirement, these decisions don’t matter much, but the average American does not have millions saved.
To prepare for situations such as the one where you are sick or injured and cannot work, you should save aggressively and invest in something that provides a healthy return such as a stock index fund. Then just keep saving and investing, year after year. No one knows what your future holds, but you do know it will be expensive, so save all you can. You could be healthy as a horse and live to be 100 or you could get sick or injured tomorrow and never work again. There is no way to know how much money life will demand or what surprises await you. But if you plan ahead and save and invest faithfully, you will be as ready as you can ever be.
If the unexpected happens, are you prepared? When do you plan to retire? What will you do if you can no longer work?
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