As people leave the workplace, retire early, or shift careers, many have started calling this time the Great Resignation. The pandemic has changed the way people work and likewise, how they think about their life and their goals. Even Alan has decided to work from the road as he now spends half of his time in an RV in Florida.
Some companies have begun to shift toward workplace freedom, allowing employees to work and live anywhere. But the companies that haven’t shifted may be less appealing to work for, pushing some employees to leave.
This is having a wide impact though, including on Social Security. With people leaving the workforce sooner than expected, less are contributing to Social Security. How does this impact your own Social Security if you retire early? On the other hand, some have decided to take money out of their 401(k). Is this a good idea?
Ideally, everyone should have three to six months of expenses in a cash account that works as a rainy-day fund or emergency fund. But sometimes big things happen, leading people to need more money for a major life event. Instead of taking that money from your 401(k), it might be worth getting a loan elsewhere.
If you’re getting a new job elsewhere, make sure you bring your 401(k) with you. This gives you more control over your assets and prevents you from accidentally losing track of it. In most cases, it’s worth rolling it over into an IRA
Finally, if you’re thinking about retiring early during this Great Resignation era, be careful. Have you thought through your options and financial plan? Consider your health insurance, which is a significant monthly cost. Have you factored in inflation? It’s important to look at your individual situation and ask a financial advisor to see if you can retire now or make a significant life decision.
Listen to the entire episode or skip ahead using the timestamps below.
1:17 – People are leaving the workforce, coined the “Great Resignation.”
5:37 – Those leaving the workforce are no longer contributing to Social Security.
7:21 – Some chose to take money out of their 401(k) this past year.
12:10 – Take your old 401(k) with you when you leave a job.
14:25 – Be careful before you retire early.