In her last blog, Dr. Mary Donahue pointed out how important it is to think about retirement sooner rather than later.  No one could have predicted that in the year 2020, the world would experience a pandemic that would literally change the way we view working, retiring, and living our lives.  Retirement; which might have seemed far off for many professionals such as teachers, is suddenly becoming a choice now  that many are considering. Numerous professionals who are being asked to go to work into what they consider to be potentially unsafe environments are now forced to consider retirement or a career change from their chosen occupations.

Financial experts recommend that you have a cash reserve of 3 to 6 months in case of an unexpected emergency. Certainly, the recent coronavirus, which cut off wages for many suddenly and unexpectedly, has driven home the real need for this cash reserve. Sadly, many people live paycheck to paycheck either from necessity or because they thought their jobs were secure.  In fact, a study issued in December 2019, indicates that 69% of Americans have less than $1,000 in savings and 45% have no savings (Source: GOBanking Rates). But then the virus reared its ugly head and their job situation was no longer stable. Thoughts of retirement which previously may have been on a back burner can no longer remain there. 

Teachers, in particular have been faced with the undeniable reality that the jobs they thought they had and the time they had to plan for retirement is now in jeopardy. Teachers approaching retirement now are faced with an inescapable dilemma. Several are considering taking early retirement and are struggling with the ramifications of such a move. If they retire, will they need to do something else?  If so, what are the other options?  Recent news interviews illustrate that many teachers and other professionals may be thinking they have no choice but to leave their lifetime profession with insufficient previous planning.

As Dr Donahue indicated in her last blog, this is a tough decision to make and definitely one not to make in haste.  This is a time when a financial planner can be very helpful. Many planners will work for you on an hourly basis to help you make the right decisions—ones that will impact you the rest of your life. Given the current situation, working with them virtually has become commonplace thanks to Zoom and other similar services!  See Chapter Eleven in our bookYour Next Chapter, A Woman’s Guide To A Successful Retirement for more information about finding a planner. 

Putting together your financial information 

With or without a planner to help you, you will need to gather the pertinent financial information to help you make reasoned decisions. If you have a partner, they should gather the same information as well. 

You need to start by figuring out what your potential sources of retirement income are.   Go to Social Security website (www.ssa.gov/myaccount.com) to get a statement of your benefits.  Or call them at 1-800-772-1213.  This statement will show you how much monthly income you will receive at different ages.  One little known fact is that the amount of Social Security income you will  receive is based on your highest 35 years earnings adjusted for inflation.  If you have worked less than 35 years, those missing years will be entered as zero which will reduce the amount you will receive.

 Are you entitled to pension income?  If you own a deferred annuity, find out how much income it can provide you.  How much have you accumulated in your retirement accounts? Do you have life insurance which can provide you with retirement income? 

 What do you think your expenses will be if you retire or your income is reduced? You have fixed expenses which are the same monthly, quarterly or annually. In addition, you’ll have variable expenses which fluctuate, such as income taxes (which many forget to include as an expense).  The best way to figure out what these might be is to look back at the past year and see how you spent your money. Based on this information, you can estimate what they might be in the future.  You can determine which expenses you can cut back on if necessary. For instance, if you are able to work remotely, then obviously commuting and clothing expenses will be reduced, but utility bills will go up. 

In Chapter Two of our book, Your Next Chapter, A Woman’s Guide To A Successful Retirement, we’ve provided worksheets which will help you estimate what your income and expenses might be in the future.  Don’t forget that most expenses increase over time, so an inflation factor needs to be taken into account when predicting future expenses.  In addition, there are always the unexpected expenses, such as appliances that need to be replaced, a loan to a family member, medical expenses or a higher than expected income tax bill.