How to Prepare Yourself Financially for Forced Early Retirement?


The only thing certain about life is the uncertainty it comes with. No matter how rewarding or satisfying your current personal or professional life is, there is no way to predict what might happen in the future.

For instance, you might be loving your 9 to 5 job and would like to continue working till you are 60 years old. But life can have a different plan that might force you into early retirement. It could be due to an illness, injury, outdated skills, sector/industry collapse, technological disruption, or several other reasons.

With no monthly income, you’ll have to rely on your savings and investments for future expenses. While nobody generally likes to think about this eventuality, it is wise to be prepared for it, at least financially, as we can never know what this unpredictable life holds for us in the future.

Here are a few tips to prepare yourself financially for forced early retirement-

1. Save Dedicatedly

As you progress through your career and start earning more, the urge to spend on luxuries will rise too. While it is completely alright to spend your hard-earned money on the latest gadgets, family vacations, or a new car or house, it is essential never to lose sight of the long-term objectives.

If you are pushed into early retirement, your savings will be the first to come to your rescue. Work on a savings plan for such uncertainties and dedicate a portion of your monthly income religiously towards it. Save first and spend later rather than adopting the faulty yet prevalent mentality of spending first and saving later.

2. Understand the Basics of Investing

If you are forced into early retirement, you might be required to withdraw your investments. Many of the popular investment options have a lock-in period. It might not be possible to withdraw your investment before the lock-in period is over, and even if there is an option, you might be required to pay a penalty or lose a significant portion of the expected returns.

Taxation is another aspect that is impacted by the duration for which you remain invested. So, while building your investment portfolio, ensure that you choose at least a few options where you have complete freedom to withdraw your money as and when you like.

3. Invest in a Health Insurance and Life Insurance Plan

The healthcare expenses will rise as you grow older. With the rising cost of healthcare in the country, any sudden illness or accident can put a significant dent in your savings, especially when you are not working anymore. Purchasing a health insurance policy is an effective way to protect your finances against such events.

Also, if you are forced into early retirement, you’d mostly not be able to accumulate the desired retirement corpus. In case of your unfortunate demise, it might get difficult for your family members to manage their expenses. With a life insurance plan, your policy beneficiary will be provided the death cover, which can add financial stability to their life after your demise.

4. Consider Investing in a Retirement Plan

A retirement plan is a smart way to continue earning a regular income even after you stop working. The plans require you to dedicatedly save towards retirement throughout your working life and start receiving a regular pension after you stop working. Some plans also come with rider options such as permanent disability and accidental death for added security.

When you are pushed into early retirement, the pension and other benefits offered by a retirement plan could help you better manage your post-retirement expenses. The plan will also ensure that you are not forced to use your savings or withdraw your investments for basic expenses.

Planning for a Forced Early Retirement

Forced early retirement can only be handled in a worry-free manner if you start preparing for an eventuality of this magnitude from an early age. Consider the points discussed in this post to add more stability to your post-retirement life, whether you retire at 40 or 60.

You can always consult a financial advisor to create a dedicated saving/investment plan that will prepare you for eventualities like forced early retirement.

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