While some people long for an early retirement, others get forced into leaving work before they planned to.

When you’re faced with an unexpected retirement, your previous vision of your carefree golden years may become tinged with anxiety, fear, and self-doubt. How will you handle your household expenses without your work income, not to mention all those empty hours in your day now that you don’t head to work each morning?

Before full-blown panic sets in, take a look at five tips to help you not only survive but thrive when faced with an unexpected early retirement.

1. Assess Your Financial Situation Immediately

To survive an early unexpected retirement, face your financial reality right away so you can take action to make any required changes as soon as possible.

What Cash Comes In, What Cash Goes Out

Start with your cash flow, the money coming into and going out of your household. If you have a spouse who’s employed, list their take-home pay, along with any Social Security payments and employer pension payments for which you may qualify. When you reach age 62, you’re eligible for a reduced Social Security payment (75% of the full amount you’d get if you waited until age 66).

Next, find your most recent retirement account statements. Take note: You can access your retirement funds such as your 401(k) and IRAs without penalty at age 59½, and sometimes prior to that if you meet eligibility requirements for a penalty-free early withdrawal. (You still will owe taxes on any pretax contributions you withdraw.)

In planning for long-term income, the financial planning rule of thumb is that if you withdraw 4% per year from your retirement funds, your savings should last about 30 years. So, for a very rough estimate, total up all of your retirement savings and multiply that figure by .04. Then divide that by 12 to get your potential monthly income from your retirement plans.

For example, if you have a total of $500,000 saved, then you could access retirement savings of $1,666 (less any penalties or taxes) monthly [4% of $500,000 equals $20,000 annually, divided by 12].

Now it’s time to look at your monthly expenses, or outgoing cash flow. Refer to your monthly household budget or, if you don’t have one, list all of your current bills and expenses. And then add “make a household budget” to the top of your to-do list.

Include everything: housing costs, food, clothing, utilities, miscellaneous expenses.

Consider how not working may lower your monthly expenses. Perhaps you’ll reduce your transportation costs because you’ll no longer have to pay for public transit or gas for your car to commute. Plus, you may now spend less on clothing, dry cleaning, and restaurant meals.

What You Own and What You Owe

Next, list your assets and debts, also known as what you own and what you owe. This helps you identify potential money making and money saving opportunities. Perhaps you have little-used assets you could sell to gain cash and lower your monthly expenses. For example, you’d forego a second set of utility bills and property taxes if you sell a cottage or vacation home. Or you could save money on auto insurance and vehicle maintenance if you sell a second car.

If you were laid off, you may be eligible for unemployment benefits, or you may have received a severance package. Make note of the dollar value after deductions. A portion of this money could be used either for additional savings to live on until you reach the age of 59½ (when you can withdraw from your retirement accounts penalty-free) or to pay off outstanding high interest rate debt.

As you list your debt, include the balance owed and the interest rate you’re currently paying. Also start keeping your eyes open for any opportunities to move credit balances to 0% balance transfer offers from credit card companies. This can save you money on interest (for a specified period of time) and also reduce your monthly payments to help with near-term cash flow.

2. Act Fast to Adjust Your Financial Lifestyle

It’s possible you could survive on your non-work income. Or maybe you do need additional income, and will decide to look for a new full-time or part-time job. In either case, it’s a good idea to get rid of unnecessary expenses quickly when you’re dealing with an unexpected early retirement. This way you won’t be adding to your financial stress as you adjust to your new reality.

Look for opportunities to cancel unused print magazine subscriptions and gym or golf memberships. If you had a cleaning service while you were working, cancel it and do your own housework. Avoid expensive restaurant dinners and special events for now, and either cancel or postpone any luxury vacation plans.

In addition to consolidating your credit payments to a low interest or 0% interest rate credit card, see if you can negotiate a lower rate on your cell phone/home phone and internet contracts, either with a lower bundled rate or by switching to a lower-cost competitor. You could save even more by canceling cable TV and watching your favorite shows streamed online or through a service like Netflix. Also look at your homeowners and auto insurance; by bundling both policies with the same insurer, you may be able to save up to 5% on auto insurance and 20% on home/condo/renters insurance.

After a few months, you may notice you’re surviving just fine within your new budget, and can afford to reintroduce some of the items you originally cut out.

3. List the Benefits of an Unplanned Early Retirement

You may find it easier to adjust to an unexpected early retirement if you think of it as a blessing in disguise, rather than a devastating setback. Now you’ll have the time and opportunity to do all sorts of things you didn’t have time for when you were working.

Some benefits of an unexpected early retirement may include:

  • No work-related stress
  • No work-related expenses
  • More time for family and friends, including aging relatives and fast-growing grandchildren
  • More time for favorite pastimes and/or hobbies
  • Opportunity to take better care of your health and fitness, by walking, hiking, etc.
  • Opportunity to complete unfinished household projects or take on new ones
  • Opportunity to volunteer your time and services to your favorite charity, service, or faith-based organization

4. Pursue a Money-Making Dream

To thrive rather than just survive an unplanned early retirement, also consider it as an unexpected opportunity to pursue your money-making dreams.

Have you always wanted to own your own business?

Maybe you’ve daydreamed about running a bed-and-breakfast, offering a dog-walking service, or setting up a pet-grooming business. Or perhaps you’re ready to share your professional knowledge by writing a book, launching a website, or starting a freelance consulting business.

Your early retirement could be just the excuse you needed to chase those dreams — and the money can come in handy as well, helping allow you to thrive financially rather than just survive.

5. Plan Your Days and Work Your Hobby

Now that you’re no longer punching a time card or required to be at your desk at a set time each weekday, your days are your own.

To really thrive in an early retirement situation, it’s important to have a rough plan or schedule of how to spend your days. This helps you ease into the freedom of your new lifestyle, after having spent years on a regular work schedule. And the good news is that you can choose to fill your days with activities that make you happy, and that may also help boost your retirement income.

What gives you pleasure and makes you feel fulfilled?

If you love gardening, look for seasonal work at a nearby nursery or garden center. Love to read? Check out part-time positions at the library or local bookshop. If the outdoors beckons, consider working at a golf course. New retirees who aren’t quite ready for a more relaxed lifestyle may find part-time work to be a good solution for the revised budget and empty hours of an unexpected early retirement.

At first, an unexpected early retirement may seem devastating. However, if you have a spouse who still works, your home is paid for, or your debts are small (or you don’t have any), just a few adjustments to your monthly expenses could be all that’s needed for your household to survive without your work income. When you change your mindset about becoming a surprise retiree, you may soon see that early retirement offers new opportunities to thrive as you pursue your money making dreams or favorite hobbies.

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