Retire from Work Due to a Health Issue

Retiring from work due to a health issue can be stressful. You may be retiring much earlier than you had expected, which may mean that you did not have the chance to save as much as you wanted to. Regardless of your situation, you will need to carefully evaluate the benefits that are available to you and your retirement savings account. After comparing your income to your monthly expenses, you will be able to determine if you need to adjust your retirement plan or your lifestyle in order to avoid running out of money.

Steps

Finding Out What Benefits Are Available to You

1. Determine how much you will get from social security and/or your pension. If you are retiring earlier than expected due to a medical issue, it's important to understand how that will affect your social security payments and your pension. Depending on your age and the length of your employment, you may be eligible for full benefits, partial benefits, or no benefits at all.
   • The age at which you are eligible to receive social security benefits depends on the year in which you were born. You can choose to receive benefits a few years earlier as well, but you will not receive as much money. For example, if you were born after 1960, you can receive full benefits starting at age 67 and partial benefits starting at age 62.
   • To estimate your social security benefits, visit the Social Security Administration's website.
   • You may have to talk to the HR representative at your company to get detailed information about your pension plan. As with social security benefits, you may be penalized if you choose to begin receiving a pension before a certain age.
2. Look into social security disability. If you are a United States citizen and a medical condition causes you to retire, you may be eligible for social security disability benefits. In order to qualify, you must be able to demonstrate that your medical condition has prevented you from working. You also must have enough work credits, which are earned each fiscal quarter that you pay into social security.
   • If you are over the age of 60, you need to have worked at least 10 years to qualify for social security disability benefits.
   • If you are under 60, there are also additional restrictions that require you to have earned a certain number of work credits within recent years.
   • If you get approved for social security disability, you will be able to collect social security retirement income at age 62 without a penalty.
3. Determine if you qualify for benefits due to work-related disabilities. If your health issue is work-related at all, you may be eligible for worker's compensation. In addition to providing benefits for short-term and long-term disability, worker's compensation also covers medical bills that are incurred as a direct result of your work-related disability.
   • Work-related disabilities include acute injuries, illnesses caused by long-term exposure, and aggravations of existing injuries.
   • You may have to file an appeal if your employer's worker's compensation carrier does not initially approve your claim.
   • Be aware that if you get worker's compensation, you will typically not be eligible for social security disability.
   • Each state creates its own laws regarding worker's compensation, which may affect how much you are entitled to.
   • In most cases, worker's compensation is the only compensation that you can get if you were injured at work. However, in some specific cases, you may be able to sue for more benefits. This option may be available if a third party was involved in your injury, if your employer does not offer worker's compensation, if you were injured by a defective product or toxic substance, or if you were injured as a result of intentional or egregious acts on the part of your employer. Contact a lawyer if you believe any of these circumstances apply to you.
4. Find out about insurance. Insurance is crucial, especially if you are experiencing health issues. In order to retire comfortably, you will need to understand how you will maintain your insurance in retirement and what the insurance you have will cover.
   • Find out if your employer offers insurance coverage to retirees.
   • If you are under 65, you will not be eligible for Medicare, so you will have to maintain private insurance or apply for Medicaid.
   • Be sure to think about your medical needs. If you need a lot of care and there is no one at home to offer you that care, you may need to enter an assisted living facility. If you have long-term care insurance, this may be covered, but it is important to contact the provider to verify your benefits.

Adjusting Your Retirement Plan for Early Retirement

1. Figure out how much money you will need. If you find yourself retiring earlier than you had planned, you will need to take a good look at your finances and determine how much you will need to live on each month. If you don't create a monthly budget, you risk running out of money during retirement.
   • Calculate all of your regular monthly expenses, including housing, transportation, utilities, food, and anything else you spend money on.
   • Don't forget to include variable expenses (things that you don't pay for every month). This may include things like insurance or water bills, which you only pay a few times a year.
   • It's also important to set some money aside for unexpected expenses, like car repairs and medical bills. It can be difficult to plan for these expenses, as you never know exactly how much they will cost, but do your best to create a healthy emergency fund.
2. Evaluate your portfolio. Once you have determined how much money you need to live on each month, take a look at your retirement savings portfolio and determine whether it is large enough to cover these expenses for the duration of your retirement. If it is not, you will need to look for ways to earn more money or spend less money in order to sustain yourself through retirement.
   • Don't forget to include any benefits you may get from social security or a pension.
   • To avoid depleting your assets, you should aim to withdraw no more than 4% of your assets each year. Theoretically, this strategy should remove the risk of your outliving your savings.
   • When calculating how long your savings will last, don't forget to factor inflation into your projections.
3. Decide if you can withdraw less than you had planned. If you already had a retirement plan in place that was based on withdrawing a certain amount of money each month before your health became an issue, think about how retiring earlier will affect that plan. If you are not retiring much earlier than expected, you may be able to adjust your withdrawals slightly to accommodate for the change.
   • Be sure to consider how you will live on less than you had planned. You will need a solid plan for reducing your expenses in order for this strategy to work.
4. Consider new strategies. If you can't make your current retirement savings last for the entire projected length of your retirement, you may want to consider looking for new ways to invest the money you already have. You will most likely want to look for investment opportunities that are low-risk since a volatile market can leave you with nothing overnight.
   • For example, you may want to consider investing in lifetime income annuities, which will provide you with a predictable source of income each month.
   • If you have equity in your home and are over the age of 62, you may also want to consider a reverse mortgage, which will provide you with monthly payments while allowing you to continue living in your home.

Adjusting Your Lifestyle

1. Spend only on essentials. If you don't have enough saved to sustain your current spending habits throughout retirement, you may need to get used to living on less. The more wasteful spending you can cut out of your budget early on, the more comfortable your lifestyle will be. In addition to not buying anything you don't need, you can also find ways to spend less on the everyday things you do need.
   • Always comparison shop to make sure you're getting the best deal on everything, from groceries to insurance.
   • Stop buying things out that you can make at home, such as coffee and meals.
   • Don't buy things that you can borrow for free, like books.
   • Look for other monthly expenses that you might be able to cut, like your cable subscription or a gym membership you never use.
2. Consider downsizing. If cutting down on everyday expenses isn't enough, you may want to consider moving to a smaller home. Housing expenses are typically a huge part of an individual's monthly budget, and reducing this expense can help ensure that you have enough money to continue living comfortably throughout retirement.
   • If you own your home, downsizing may leave you with a significant amount of cash that you can put towards your everyday expenses in retirement.
   • Downsizing will also typically reduce other costs associated with housing, such as utilities, insurance, and maintenance.
3. Think about relocating. If you live in a very expensive area, moving somewhere where the cost of living is lower may also be a good option. Be sure to consider the lifestyle changes this kind of move will bring with it. For example, you may have to live further from your family or from everyday conveniences.
   • In some cases, this may simply mean leaving the city for the suburbs or leaving your exclusive neighborhood for a more modest one.
   • You may also want to consider moving across the country or even to a different country.
4. Earn money during retirement. If you don't have enough money saved to sustain you through your retirement, you may need to think of other ways to earn income. The right option for you will depend on your skills, your assets, and your health.
   • Depending on your health issues, you may be able to work a part-time schedule to avoid retiring completely.
   • Even if you're not in good enough health to work a regular job, you may be able to do some freelance consulting work.
   • You may also be able to earn income from other investments. For example, if you own property, you may be able to rent it out, which will provide you with reliable income each month.
5. Make changes that will improve your lifestyle. In addition to financial considerations, it's also important to think about your health. If you're retiring due to poor health, be sure to consider what changes you can make to your lifestyle that would make your life easier and more comfortable.
   • In some cases, moving may improve your lifestyle. You might want to move to be closer to family members who can help care for you, to be closer to doctors and/or hospitals, to be in a home that is safer for you if you have physical limitations, or to be in a climate that is better for your health.
   • If you don't want to live completely alone, you may want to consider moving into an independent living or assisted living facility. Alternatively, you may decide that you need to hire someone to help you with certain tasks, like cleaning or laundry.

Planning Ahead

1. Avoid debt. If you want to ensure a comfortable retirement for yourself, it's best to avoid taking on as much debt as possible. This means not financing an extravagant car if you are able to buy a more affordable one without borrowing money. It also means only using credit cards if you can afford to pay off the balances,
   • Taking on certain kinds of debt, such as a mortgage or a loan for college tuition, may be worth the investment, as they are likely to pay off in the future.
2. Stay as healthy as you can. While there is no way to prevent all health issues, being proactive about yourself can help protect you against many ailments. Start taking care of yourself when you are still young to avoid having to deal with a forced retirement due to poor health.
   • Eat a balanced diet and exercise regularly to maintain a strong body and a healthy weight.
   • Get plenty of sleep.
   • Reduce stress as much as possible.
   • Follow your doctor's recommendations for preventing specific diseases. Common recommendations are to avoid smoking, to protect yourself from the sun, and to maintain low cholesterol and blood pressure.
3. Start saving for retirement as soon as you can. The earlier you start saving for retirement, the less you will have to worry if something happens that forces you to retire earlier than you had planned. Start contributing to a 401k or IRA as soon as you can.
   • Starting an emergency fund in addition to your retirement fund can help you deal with unexpected medical expenses without having to withdraw from your retirement savings.
4. Get insured. One way to protect yourself in the event that you may need to retire earlier than you had planned is to start investing in long-term care and disability insurance.
   • These insurance options may be available to you at a reduced rate through your employer. If not, you may also be able to purchase a policy directly.

Tips

• You will be more likely to find part-time or consulting work at an older age if you stay up-to-date on the latest trends and technology in your industry.
• Meet with a financial planner to create a plan for your retirement. This can be helpful whether you are being forced to retire because of a medical issue or if you simply want to start planning for your future.
• Stay as active as you can in retirement. This will help keep you healthier and happier.

References

See also

• Make a Retirement Gift Basket
• Know How Much to Give for a Retirement Gift
• Make a Retirement Scrapbook
• Use Life Insurance in Your Retirement Planning
• Transfer Retirement Funds to a Roth Ira
• Start a Retirement Home in Ontario
• Retire from a Job You Love
• Prepare for Early Retirement
• Prepare for Retirement in Your 20s
• Plan for Long Term Care

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