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Retiring earlier than you planned


At a glance

  • Process your emotions before taking action.
  • Make sure you have health coverage.
  • Figure out if you’re financially ready to retire, and if you are, whether it’s really what you want.

Whether you had a written retirement plan or not, you probably drew a mental picture of how your retirement would look—and had a general idea when it would begin.

But plans don’t always go according to … well, plan. And you may find yourself leaving the workforce earlier than expected due to an unforeseen circumstance such as a layoff, buyout, health issue, or family responsibility.

While retirement may have been out of your control, here are a few tips to manage what you can control.

Process your emotions before taking action

Forced retirement can come as a surprise, stirring a range of emotions that make it hard to think straight. You may be overwhelmed by worry and stress or feeling angry or betrayed. Maybe you’ve been considering early retirement and are feeling relieved.

Your emotions will take time to process—and that’s okay. While you work through them, don’t take any actions in the heat of the moment that you might regret later.

Do you have a cash reserve that can hold you over for a few months and provide separation from your initial emotions? If not, focus on cutting your spending until you determine whether you’re ready for long-term retirement.

Focus on health coverage

If your health coverage remains unaffected—for example, maybe you’re covered through a spouse’s plan or you’re enrolled in Medicare—you can skip this step. But if your health insurance ended with your employment, insurance coverage is likely your most pressing need.

If you’re age 65 or older but haven’t signed up for Medicare, you’ll need to get on it right away. Here’s how it works. You have a 7-month initial enrollment period that begins 3 months before you turn 65 and ends 3 months after the month you turn 65. If you don’t sign up during this time, you may be late and subject to a lifetime premium penalty, even if you were covered through COBRA, another insurance provider, or an employer plan.*

Now, if your employer covered your health insurance and you lost your job, you have an 8-month special enrollment period to sign up for Part A and/or Part B, starting at one of these times (whichever happens first):

  • The month after your employment ends.
  • The month after group health plan insurance based on current employment ends.

*The size of your employer determines whether you’re required to pay a penalty for not enrolling when you were first eligible.

If you’re not age 65 yet but you’re married or in a domestic partnership, your best option may be to obtain coverage through your partner’s health plan. Generally, you have 30 days to obtain this coverage outside open enrollment season.

If Medicare and a spouse’s plan aren’t options, you must buy your own insurance. Some options you may want to evaluate include:

  • Insurance through COBRA (Consolidated Omnibus Budget Reconciliation Act). This federal law allows you to stay on your employer’s health care plan for up to 18 months. It can be expensive, but you’ll have the same coverage you had while working.
  • High-deductible health plan (HDHP). This might be a better option if you’re in excellent health—HDHPs generally only cover “catastrophic” health care needs.
  • Plan purchased through your state insurance exchange. Compare the prices with COBRA premiums. Under the Affordable Care Act (ACA), you may be eligible for a tax subsidy.

Under most circumstances, you usually have 60 days from the day you lose your former coverage to enroll in an individual plan.

More information

Check out: Planning for health care in retirement
See your Medicare options and enroll at
Learn more about coverage under the ACA and see your options at

Take stock of your financial situation

Once you take care of your health insurance, you’ll need to figure out how much money you have available to spend for the rest of your life—and whether that amount is enough to cover your expenses.

What income sources do you have?

First, consider the income sources to which you have immediate access—an annuity, a rental property, or pension payments from a previous job. And don’t forget your spouse’s income, if applicable. Find out when your annuity or pension payments start and how much you’ll receive.

Then determine whether it makes sense for you to collect Social Security retirement benefits by considering the following factors: eligibility, marital status, health, life expectancy, tax profile, and employment status. When you decide to start collecting benefits will have a lasting effect on the monthly amount you’ll receive for life. For example, collecting your benefits before your full retirement age (67 for most people) can reduce your monthly payment by as much as 30{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca}. And if you end up returning to work, your benefits will be reduced until you reach full retirement age.

If you’re definitely not going back to work and have no other income, collecting Social Security early may make sense. If you end up deciding to collect reduced benefits before your full retirement age and later realize you don’t need the benefits anymore, you may be eligible to take advantage of the following rules:

  • The “reset” rule, which allows you to reset your benefits and erase the reduction, or
  • The “voluntary suspension” rule, which allows you to suspend your benefits once you reach full retirement age, then restart them later.

Learn more about the pros and cons of the reset and voluntary suspension rules

Before taking Social Security, ask yourself if you need the money or if you can get by with your other income sources. For now, conduct research with these helpful tools and considerations:

Can you tap into your retirement savings?

If you’re at least age 59½, you’ll also have access to your retirement savings—401(k)s, 403(b)s, and IRAs. Again, don’t touch them unless you need to. Your retirement might last longer than you planned, and the longer you leave that money alone to grow, the better.    

If you’re under age 59½, you might still have options for using your retirement money without penalty if you need to. Here are a few:

  • You can withdraw Roth IRA contributions anytime without paying penalties or taxes. (This only applies to contributions—you’ll still owe taxes and penalties on any earnings distributed before age 59½.)
  • You can access money in traditional retirement accounts through substantially equal periodic payments (SEPPs), a method of withdrawing money that exempts you from early withdrawal penalties. However, once you start SEPPs, you must keep taking these withdrawals until age 59½ or for a minimum of 5 years, whichever is longer. Make sure to consult with a qualified tax advisor.

How much money do you need?

Now that you’ve determined your income sources, it’s time to look at the money you’re actually spending. Here are a few factors to consider:

  • Now that you’re not working every day, will you spend less on clothing, fuel, vehicle maintenance, or public transportation?
  • Have you paid for previous services you can do for yourself now? For example, can you eliminate home maintenance fees such as housecleaning or landscaping bills?
  • What other discretionary expenses could you give up if you had to?

Use this interactive retirement expenses worksheet to estimate your monthly retirement expenses. Once you know how much money you have and how much money you need, you’ll be in a better position to determine your best path forward.

Need a second opinion?

An outside perspective can help you see things more clearly. Consider reaching out to a friend, family member, or Vanguard Personal Advisor Services® to serve as a neutral party to help you clearly assess your situation.

Decide how to move forward

In the best-case scenario, your resources will exceed your expenses. You may find you’re in a solid position to retire and don’t need to worry about working again. Or you may discover that while you’re financially capable of retiring, you still want to work. There’s a lot to be said for staying busy and continuing to save more for the day you do decide to retire.

In an alternative—possibly more likely—scenario, you won’t have enough money to live the retirement you envisioned. In that case, you may want to explore returning to work. Perhaps a part-time opportunity may suffice to supplement your income. And don’t rule out unconventional options, like working as a freelancer or consultant, teaching at a local community college, or finding occasional gigs through a service like Uber.

If you can’t work for any reason, see whether you can get by with only Social Security for now to let your retirement money keep growing—you can always reassess your situation later.

Bonus tip

Retirement calculators are a helpful tool to estimate how much you need to save for retirement. Many use a general guideline that assumes you’ll need 85{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} of your current income in retirement. Depending on your situation, you may need less or more. Check out Vanguard’s retirement income calculator 


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