"I'm making a fortune knitting Jayne's cunning hats for Etsy!"
Your Retirement Questions Answered has returned!
Today, we'll be answering the question posted by regular commenter frugal_fun:
Well, this might not be the best topic, but a chapter might be about
what the numbers look like if you retire only when you've become
physically unwell would be helpful for me. (And unfortunately, I'm not
talking about covering the medical bills, either.)
I don't think we're going to be able to save enough to replace our
income for 20+ years without a pension plan or SS mostly to cover it.
It's a gargantuan task if you are on a fixed income but variable
expenses like most workers. (Let's face it "fixed income" for seniors is
a euphemism for "low income". Most of the US is on a fixed income. ;))
frugal_fun, I love your description of "fixed income" as a euphemism
for low income. I must say, I have wondered for years why a retirement
income is referred to as fixed when I myself have been on "fixed"
incomes while working various jobs. (Yes, there were opportunities for
raises/advancements, but they didn't happen particularly often.)
to your question, forced retirement is a toughie. Whether it comes
about because of failing health or because of late-in-career job loss,
it can be financially devastating if you don't have enough money set
aside--and let's face it, how many people really do have enough money
However, there are five proactive measures you can
take now and in the future in order to keep a forced retirement from
making you eat cat food in retirement:
1. Find out what you can
expect from Social Security Disability and Retirement benefits. Believe
it or not, at least the customer service side of Social Security has
embraced the 21st century, and you can find an incredible number of
user-friendly apps and information online. In particular, you can use
the Social Security disability calculator, which provides you with a (very rough) estimate of your disability benefits. There are also several Social Security retirement benefits calculators, which you can personalize and use to get anything from rough estimates to exact projections of your retirement benefits.
a fun party trick, go ahead and look up what you can expect from Social
Security. It's pretty illuminating--and it gives a good idea of what
your life in forced retirement would be like if you put no other money
aside. (NOT recommended!!)
2. Invest in adequate disability insurance. As I mentioned last year, I'm quite the convert to disability insurance. If you are concerned about the possibility of losing your ability to work, then disability insurance is a must.
there are several things that can disqualify you from a disability
policy--pre-existing conditions, physically demanding jobs, and jobs
with irregular income (like freelancing or owning your own business).
But if you're able to get your disability insurance on, do it. Do it
3. Start a second income stream. This was the sort of advice
that used to annoy me about reading personal finance articles when I
first starting writing in the genre. Many of my colleagues would beat
the drum of the importance of additional streams of income, and I often
wondered what parallel universe they lived in and exactly how many extra
hours per day they enjoyed in that universe.
understanding better why second income streams are important. We rely on
our jobs for so much, and if anything happens to our ability to perform
those jobs, having something already set up to fall back on is an
incredible gift to ourselves.
I personally feel like every family
should strive to have a two extra income streams, preferably one passive
and one active (even though I am generally somewhat skeptical of the claims about "passive" income).
But, if you're able to collect rent from a boarder and also sell your
crafts on Etsy, then you know that something can and/or will be coming
in if you lose your job or you suffer from failing health.
note--this is one of those things where I do not practice what I preach.
Someday, I hope to be in that position if I can continue to write and
earn money from writing I've already done. But I entirely understand how
this can be much easier said than done.
That being said, my
sister and brother-in-law are a living embodiment of how this works.
Dave owns a house in one of the cities where he was previously
stationed, which he rents out. And he takes gorgeous photographs that he
sells on Etsy. In addition, my sister does freelance editing and
writing on top of her day job.
4. Know your bare minimums. We all
get pretty used to lifestyle creep, and so it can be tough to remember
just how little we all need to be happy. A friend told me about an
elderly retiree friend of hers who lost everything and is now living in a
low-income home for seniors under very reduced circumstances. But as
long as this retiree can get books from the library, she is perfectly
content, despite the fact that her life is no longer like it used to be.
why I think it's a good idea to really think about what you need to
feel good about your life and yourself, and even practice living that
way (as much as possible) before retirement. Then you won't feel
resentful of the changes in your life if you are forced into an early
5. If you are forced to retire early because of a
layoff, be an assertive negotiator. Granted, this is not helpful if
health is the reason why you have to hang up your hat, but it is
something that many people might be too shell-shocked to consider when
they are laid off. So, be prepared to fight for a generous severance
package. The worst they can say is no.
Have any of you experienced a forced retirement? What have you learned from the experience?