How to Cope with a Sudden, Unplanned Retirement

Planning for retirement (and affording your expenses when you’re retired) can be difficult even if you have a set retirement date in mind. Getting by financially when you’re not working is tough. However, life is unpredictable, and you could end up retiring suddenly and without any choice. That situation is even tougher.

Your company might downsize, you could leave your job due to health issues, or you may have to stop working to care for a family member. You may want to work after this, but be unable to find a job due to your age, role, current skillset, or other reasons. Whatever the cause of your sudden and unexpected retirement, the reality is the same: it is difficult to deal with.

So, what should you do if you suddenly find yourself retired? Here are some tips.

When you first find yourself without work, you will likely be anxious, worried, and even potentially angry. Do not make any quick decisions without properly thinking them through. Take some time to breathe, calm down, and think before you act.

Review your current financial situation. How much debt do you have? What are your assets? How much do you spend each month? What sort of income will you have (RRSP income, government pension, work pension, etc.)? Do you have any savings? Take stock of your situation so you know what you’re dealing with.

Once you know how much debt you have and what sort of income you will have in retirement, you will need to create a new budget. This budget will likely be very different than the one you had when you were working. There is a good chance that you will need to reduce the amount that you spend every month so that you can make ends meet. Remember that you’ll need to include emergency savings in your budget as well. Unexpected expenses certainly come up, and you’ll need to be prepared for them when they do.

If you’re not able to afford all of your expenses on your new retirement income, you’ll need to make changes. The solution could be to spend less, earn more, or to do both. Try to eliminate any extras from your budget, even temporarily.  Cut down your spending as much as you possibly can. You might be able to reinstate some of your spending later on, but it’s a good idea to reduce it as much as possible to start with. That way, you’ll give yourself some financial breathing room while you get used to your new reality.

You also may want to consider ways to earn some extra money, if you’re able. Working part-time or doing some contract work could be good ways to earn a bit on the side.

One of the most important things you can do at this point is ensure you don’t add on new debt. Debt is difficult to pay off when you’re working full-time, and almost impossible when you’re without an income. If you have any debt currently, your focus should be on eliminating it as soon as possible. Make sure that debt repayment is an item in your budget and that you have a plan for reducing your debt.

Avoid using credit cards if possible, and don’t put anything on your card if you don’t have a plan for how you will pay it back. Any debt that you get into now will be incredibly tough to deal with. At this point in your life, you should focus on reducing debt, not increasing it.

Having an emergency fund is so important. You do not know what the future holds. Your car could break down, your roof could start leaking, or you could be faced with another unexpected expense. If you do not have any money saved for emergencies, you will likely need to go into debt to afford this new cost. However, if you put some money aside each month for emergencies, there’s a greater chance that you’ll be able to cope with hidden surprise costs.

While a sudden retirement is obviously not preferable, with planning and dedication, you can improve your chances of being able to cope with this difficult situation.