Ask Terry Questions Retirement Timing

Retirement Timing

By Terry Savage on July 14, 2019 | Financial Planning / Retirement

My job was terminated this week due to corporate down sizing. I am 63, my wife 64. She retired last summer with a retirement package from her employer providing health insurance until she turns 65. I received a few months severence pay, but no paid insurance. I will likely sign up for Cobra coverage. My question is, I live in a smaller community that likely will not provide opportunities to replace my $100K plus salary. Do you think it makes sense to get another full or part time job at less pay, and begin to use my 401k/IRA money and not start social security to let that amount continue to grow? We were probably in a 1-2 year time frame before full retirement for both of us before my lay off occurred.

Terry Says

Oh, I’m sorry to hear that. And yes, this is a tough time. Thank goodness it is only for a short time.  Please do NOT sign up for Social Security until you reach Full Retirement Age!! That would be the worst mistake you can make.

And yes, do seek out another job. You never know what is out there.  Maybe you can work as a consultant — an advantage because you would not cost your employer the benefits that a full-time employee would earn.  Of course, you’d have to plan to make quarterly income tax estimated payments.  But that would be a great solution.  (In fact, you might propose that to the employer who just laid you off!  Don’t be too proud to ask!)

So here’s the real challenge:  Can you “bridge” the year between now and when you had planned to retire WITHOUT taking any money out of your retirement plan?  Yes, you will have COBRA to pay.  But the longer you can delay withdrawals from your 40l(k) the better.  If that’s your only choice, use the 40l(k) money.  But look on it as a personal challenge to reduce you living standard a bit, earn more, and delay withdrawals.

And, IMPORTANT, move the money in your 40l(k) plan into the safest option right NOW!  Yes, I know it’s a bull market and seems to move higher every day.  BUT now you can’t afford to lose a penny, so most of your money should be in the safest investments, with less than half in the stock market.

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