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Voluntary Separation Considerations

Is an early out the right decision for you?

Is an early out the right decision for you?

While you’ve been working and funding your retirement, it’s been easy. You’ve been on auto pilot, but now that you have to land the plane, you have to put your hands back on the controls.

Since Southwest Airlines came out with the Voluntary Separation offer, we've been having conversations with our SWA pilot clients to determine if the offer is in their financial best interest.

While the offer is generous and should be considered, there are several questions that you should think about before finally making this decision for your financial future. 

Retirement in Numbers

In the complex world of retirement, there are important numbers you should be aware of that could make or break your overall retirement savings. A recent USA Today article highlights ten numbers that could make or break your retirement. Here we outline our top five:

  • 42%. This is the percentage of workers who say they (or their spouse) have tried to calculate how much money they should save to live comfortably in retirement, according to a 2017 Employee Benefit Research Institute’s Retirement Confidence Survey. That’s a relatively low number given a good rule of thumb is to plan to save at least 10 times your final salary.
  • 50. This is the age at which you can make catch-up contributions to your retirement savings. At 50, you can contribute an additional $6,000 a year into a 401(k) or an extra $1,000 into an IRA.
  • 8%. Those who delay their retirement beyond full retirement age could increase their Social Security benefits by as much as an additional 8% each year until full retirement. It may seem like a small number, but it could mean big savings.
  • $1,360. This is the average Social Security benefit of approximately 41 million retired workers. It’s important to understand that Social Security benefits vary by amount of time worked and your age of enrollment.
  • 4%. On average, this is the recommended maximum percentage of assets you should plan to withdraw the first year of retirement. This is a general rule of thumb to ensure the nest egg you’ve worked hard to prepare will last at least 30 years into the future. For example, if you’ve saved $1 million, you would plan to withdraw no more than $40,000 (or 4%) that first year. Then to help keep pace with inflation, you could increase that initial dollar amount by the inflation rate each year.


Are you financially ready to retire?

A peaceful retirement can be derailed by some easily avoidable mistakes. As you start thinking about when to retire, be mindful that the right choices can bring you greater confidence later in life.

Do manage and pay down outstanding debt. Start with your highest interest debt (often a credit card) and pay it off. The sooner you eliminate debt, the sooner you remove worrisome obligations. A little extra each month will help keep you on track toward your financial goals and fewer worries.

Don’t underestimate expenses. Americans often misjudge how long they will live, resulting in unforeseen expenses. Living longer means additional years of bills, mortgage payments, leisure costs, and living expenses.

Tip: Build a reasonable budget, keeping in mind that your retirement expenses may not differ greatly from your expenses today.

Do invest wisely. Your investment can be in a home, business, education, stock market, or any vehicle that may provide a return. Whether it’s bettering your education for a more lucrative career or diversifying your stock portfolio, invest with purpose. Those who retire early actively plan and contribute to investments. Always remember to double check you’re taking advantage of any employer matching program.

Don’t retire too early. An early career exit can be a costly mistake. Timing is everything as it relates to when and how you start to draw retirement income.

Tip: Determine when to exit the workforce by calculating the amount of savings needed to enjoy a comfortable retirement.

Do live a healthy lifestyle. Unplanned medical bills can derail a financial goal quickly. Your annual check-up can often help detect and prevent a small health issue from becoming life threatening. Ride a bike instead of driving to burn calories and save on gas. Simple healthy living steps may not only help you live longer, but could boost your finances in the long run.

Don’t retire without a plan. Your unique needs and goals require a custom plan. There will always be financial surprises, but a strong strategy can help you navigate an uncertain future.

Tip: From tax advice to estate and financial planning, resources are available to help you build the plan that’s right for you and your family.

When was your last full financial review?

When was your last full financial review?

Your body needs a yearly check up and so does your retirement plan. As we adjust to 'the new normal' it's important that your financial plan allows for turbulence. During your review, you should come away with answers to these questions:

  • Has the recession prevented me from retiring at all?
  • Do any of my pensions offset my social security benefit?
  • Can I still retire after the market declines?
  • If the recession is long lasting, can my financial plan survive the turbulence?
  • Do I have an appropriate post COVID-19 budget?
  • As the world adjusts to a new normal, have I adjusted my budget, financial plan, and/or portfolio?

Would you like us to help you evaluate your ability to retire? Our Early Retirement Questionnaire will help put your mind at ease and assist you in making an informed decision. 

Making the decision to retire should be an informed one. Over the last 15+ years, we've helped guide hundreds of families in their journey of financial success. Contact us on (480) 292-8402 or to discover your retirement options.   

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