When life throws you a curveball, saving for retirement becomes a more challenging goal for Americans.
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Financial expert and author of âEveryday Millionairesâ Chris Hogan said Americans donât have enough saved for an emergency in case youâre forced into early retirement due to health issues.
âBest way to be prepared is to have a plan. Itâs why I encourage people to have a 3-6month emergency fund that they just set aside and you can just keep that liquid in a money market account and itâs available if life were to happen,â Hogan told FOX Businessâ Maria Bartiromo on Tuesday. âThere are all kinds of plans and options out there. Donât sit back and not be informed. Engage with an insurance professional so you can understand whatâs out there. Or what are some gaps in your coverage that you may need to purchase an additional policy to be able to protect yourself and your family.â
According to a new study from the Center for Retirement Research (CRR) found that nearly 37 percent of people ended up retiring earlier than planned due to a health scare.
Hogan believes that starting to save as early as possible for a rainy day is essential. Whether itâs a 401k or a 403b plan, both plans may ease the retirement anxiety especially when it involves a health issue.
âLong term care is very, very vital and important and I encourage people to have that in place prior to age 60. Beyond age 60, the price of it can really go up,â he said. âOpportunity to need nursing home care or in-home care is something that can really, really happen.â
As for those who have large amounts of debt to pay back before thinking of retirement, Hogan said, thereâs a way.
âFirst thing I tell people is to get serious about getting out of debt. When you get out of debt, you actually free up your money. You give yourself a raise, and itâs really important for student debt not to just hang out like itâs a relative, but you actually treat it like an enemy,â he said. âYou get very, very serious. You downgrade lifestyle. You take on extra income. You do whatever is necessary to attack that debt.â
The CRR cites three main reasons people are forced to retire early.
The first is poor health conditions. While you may plan to work until the age of 65 or 70, an illness or injury could prevent that from happening. You would lose months or years of income and be forced to tap into your retirement savings accounts long before scheduled.
You might also have large medical expenses that drain your savings faster than anticipated.
The second reason may be a cause in your employment changes. If youâve been laid off or your company goes under, youâll have to decide on seeking new employment or early retirement. Those who arenât able to find a new job quickly may be left without a choice.
The third cause is familial shocks. A divorce, poor spousal health or a dependent parent moving in could end up putting a strain in your finances.