FORWARD RETIREMENT
  • Home
  • Library
    • Discussions
    • Blog
    • Framework
    • Years of Income
    • Ret. Income Elements
    • Squared Away
  • Terms

How to Wreck Your Retirement Plan

11/19/2018

 
​By Brad Thomason, CPA
 
 
November is national Long-Term Care Awareness Month.  From time to time I have conversations with people who have a parent that needs care, and they are thinking about retiring early to be the caregiver.
 
Today’s post will be short, because I don’t need a lot of space to cover this one.
 
When a person is working, there are often five key things going on which contribute to a better financial position in retirement:
 
1. The current paychecks pay this year’s bills
2. Contributions to the 401(k) or similar continue to be funded
3. Employer matching contributions continue
4. The portfolio capital is left alone to compound for another year
5. The total number of years that the retirement savings will have to ultimately pay for is reduced by one year
 
When a person retires early, all five of these things stop.
 
Why the person retires does not matter, financially speaking.  Whether you have a fantastic reason (like love for a family member) or no reason at all, the dollars are impacted the same.
 
When a person retires early they are essentially giving their retirement savings a bigger job to do (cover more years’ worth of bills), and demanding that it be done with fewer resources (due primarily to forfeited future investment returns).  It’s tough to see how that could be a step in the right direction.
 
Please be careful if you are contemplating the DIY approach to helping a family member with a care situation.  The costs are likely to be much larger than what they appear on the surface to be. 
 
That’s true even before you get into the quality-of-life costs, by the way.  Which are by no means insignificant, in their own right.  Caring for another person can be demanding and stressful – so much so that it could negatively impact your own health.
 
Again, please be careful if you are facing this situation, and appreciate the fact that you are dealing with something that has the ability to do damage to your financial security, by hitting at many different aspects all at once.  Being the primary caregiver is probably the wrong answer, even if at first look it appears to be the right one. 

Comments are closed.

    Archives

    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    June 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018

    Older blogs (2015-2017) 
    located at 
    NoStockPortfolio.com

    RSS Feed

Proudly powered by Weebly
  • Home
  • Library
    • Discussions
    • Blog
    • Framework
    • Years of Income
    • Ret. Income Elements
    • Squared Away
  • Terms