Retire or go back to work? That is the question that many ask themselves in the midst of the pandemic.

The coronavirus pandemic has not only pressured Americans’ retirement savings, but it has also altered the time of retirement for many, speeding up financial decisions and forcing people to understand their income and healthcare options.

Among those who left the workforce between January and April, 60% say they planned to retire rather than return, according to a report by the National Bureau of Economic Research.

“The onset of the Covid-19 crisis led to a wave of earlier-than-planned retirements,” the report said.

For such a large life event to happen sooner than expected, a quick financial health checkup is required, including your income and expenses. Here are some tips to help you navigate an unexpected retirement or choose whether you want to return to work.

Recalibrate ‘the 4% rule’

If you are of legal age and can withdraw funds from a qualified retirement account without penalty, the 4% rule may no longer apply. The general rule, which says an investor can withdraw 4% of the balance in the first year of retirement and adjust that dollar amount for 2% inflation each year during a 30-year retirement, was built for an age when interest rates weren’t close to record lows and markets not clouded by a pandemic.

Experts say there is no single strategy for determining retirement savings and expenses, as factors such as health, risk tolerance, and longevity vary. But for those affected by an unexpected early retirement, a more prudent retirement rate of 3% may be prudent, says Maria Bruno, director of US estate planning research at Vanguard Group.

A 2019 report from the Government Accountability Office said 48% of Americans over the age of 55 have neither retirement savings nor a pension plan. And those who do have retirement savings do not have enough, and those between the ages of 56 and 61 have an average of $ 163,577, according to the Institute for Economic Policy. According to AARP, a general rule says that you will need between 70% and 80% of your pre-retirement income once you retire.

Social Security

It might be tempting to claim Social Security early, but experts generally suggest waiting as long as possible to maximize benefits. You can take advantage of Social Security from age 62, but the amount will be 30% less during retirement than if you had waited until full retirement age, which is 67 for those born in 1960 or later.

Waiting even longer, up to age 70, means your monthly payment would be 24% higher than if you start taking advantage of benefits at full retirement age. By 2020, the Social Security Administration expects to pay a maximum benefit of $ 3,790 per month for those who delayed benefits until age 70.

“For people considering taking Social Security early, I suggest they take a break,” says Bruno. “It may not be the best long-term decision” to leave all that extra money on the table.

One way to avoid claiming Social Security before you get maximum benefits is to only partially withdraw. “Retiring doesn’t have to be an all-or-nothing decision. Part-time work or consulting, which can be helpful in closing any financial gaps, “says Jill Hitchcock, senior executive vice president of the private client group of Fisher Investments in the United States.

If you decide to take Social Security before your full retirement benefits begin, financial advisers tell you to win only up to that year’s limit or that the penalties don’t make it worth it. In 2020, you can earn $ 18,240 and still collect Social Security. However, earning more than that threshold means that $ 1 will be withheld from your Social Security for every $ 2 earned above that limit.

Health Considerations

Withdrawing early can equal loss of employer-sponsored health insurance, assuming you had that benefit. You can get an extension of your company’s health insurance through federal Cobra law, usually for 18 months. The problem, of course, is that the retiree must pay the full cost of the health insurance premium rather than just the part that is generally paid as an employee. The cost can be substantial.

A retiree can also find private health insurance, such as at the federal Health Care Affordable Law exchanges. That would also be the place to look when Cobra expires and before Medicare eligibility reaches 65.

“Medical care is the big elephant in the room until they are eligible for Medicare,” said Bruno. “Being in the open market for health insurance before Medicare means much more substantial costs.”

According to a Mercer-Vanguard research report, the premium cost of a typical bronze or silver plan on federal exchanges at age 64 is about twice the cost of most Medicare coverage at age 65. For example, a silver plan in the market would cost $ 12,800 in premiums and out-of-pocket costs for 64 years.

Once you are 65, Medicare costs may be lower, but they will still be high. A typical 65-year-old woman, for example, is forecast to have $ 5,200 in annual healthcare expenses in 2018, even with the purchase of a Medicare supplement plan and a standard prescription plan, according to Mercer’s research report. Vanguard.

Still, even once someone qualifies for Medicare, many costs are not covered. Jeffrey Herman, wealth planning strategist at JPMorgan Chase, may need supplemental insurance and long-term care policies to provide comfort against unexpected medical costs.

“Many people live longer. The end of life and life expectancy has changed. You have to plan for that, ”said Herman.

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