Are you thinking of joining the big resignation? Here are 6 things to consider first.

Covid-19 has made workers reconsider what is important to them and what they want out of life. Many have concluded that the work no longer fits into that picture, according to the Northwestern Mutuals 2021 Planning and Progress Study. The survey of 2,320 adults in March found that 11% of Americans now plan to retire at a younger age due to the pandemic.

The pandemic wave of early retirement concerns financial advisers, who are worried that customers will become overconfident about their pension security due to the strong stock market. Longer life expectancy, rising health costs and inflation are among the reasons why many pension savers should stay at work a little longer and build up their assets, say advisers.

“I feel like I have this conversation every day,”[ads1]; said Chantel Bonneau, a counselor at Northwestern Mutual. “Unfortunately, sometimes I have to burst that bubble.”

Dan Simon, an advisor for retirement planning at Daniel A. White & Associates, has also had to break some of customers’ hopes. “Sometimes we have to be bearers of bad news and say, ‘This is not going to work out unless you plan to live past 75,'” he said.

If you are considering leaving work and retiring early, here are six things to consider:

● Where will your income come from? Pensioners younger than 59 1/2 are penalized for taking early distributions from 401 (k) or individual pension accounts, and they can not claim social security benefits until they are 62 years old. Without a job, you need income from rental properties, pensions, investment portfolios or other sources, which create reliable cash flow, said Northwestern Mutuals Bonneau.

“It is important that a client assesses their revenue streams and their investable assets that do not require significant performance,” she said. “Do not assume that since the market has on average given a certain return over the last 35 years, that is what you can expect for the next 35 years.”

Clark Kendall, president of asset management firm Kendall Capital, said workers should consider whether they have enough liquid assets to defer insurance until the age of 70, which is when they will qualify for their highest monthly benefit. For every year after 62 that pensioners postpone applying, their monthly benefits grow – increase by 8% annually after they reach full retirement age ––to a maximum of 70.

● Have you considered part-time work? Retirement Planning Advisor Simon said he often tells clients who are too young to retire but suffer from burnout that they should consider a hybrid retirement, working part-time in a less stressful job. By making some money, they will save more of their assets, he said.

“If they can find something they like to do part-time, maybe they can push back on collecting social security, and maybe that employer offers them some medical benefits so they can postpone pulling down on a 401 (k) or an IRA. ,” he said.

● How do you get health coverage? Bonneau said more clients want to retire early, but choose to work until they qualify for Medicare at age 65. Without employer-sponsored health insurance or coverage from a spouse’s job, early retirees may have to buy individual insurances that could cost thousands million kroner. month.

Younger retirees with enough income to live comfortably are unlikely to qualify for Medicaid or Affordable Care Act subsidies that reduce the cost of individual health insurance plans.

“Medical insurance can be extremely expensive,” she said. “I’ve talked to several clients who seem to be in perfect shape for retirement, but the only part that is missing is that they have six years until they qualify for Medicare. We’re talking about whether they will be able to to set aside enough money and stomach the thought of paying such a large amount for private medical insurance. “

● Will your assets last for 30 years or more? Simon said he asks all his clients if their parents are still alive, and many of them answer yes, even those in their late 60s. The question raises the question of the risk of longevity, and whether early retirees risk the prospect of surviving their resources.

“People tell me that their biggest financial fear is running out of money in retirement, and the sooner you retire, the more likely it is to happen,” he said.

Healthy stock market returns have enabled some workers to reach their “magic number”, the amount of assets they expect to need in retirement, Simon said. But by postponing retirement, increasing their assets and eliminating debt from mortgages, credit cards and loans, they can position themselves better for a long retirement life, he said.

● Can your plan withstand unexpected setbacks? When workers estimate their annual costs in retirement, they should remember expenses such as home repairs, car replacement and health costs such as long-term care, Bonneau said. According to Fidelity, the average 65-year-old retired couple in 2021 may need about $ 300,000 to cover health care expenses in retirement.

“If you need home help for several years, can your plan support it? Or are you going to leave yourself, your spouse or your children in a position you did not intend to put them in?” in Bonneau.

● Have you planned inflation? Kendall said workers can look at their investment account balances and calculate that they have enough assets to withdraw a certain amount each month, such as $ 10,000.

But while $ 10,000 may be sufficient now, it may not be enough to maintain a senior’s standard of living through a long retirement, especially in a period of high inflation. If pension benefits are not indexed to inflation, retirees will lose purchasing power over time, Kendall said.

He pointed to a client who began receiving a $ 3,000-a-month retirement benefit nearly three decades ago.

“When he retired, he lived fat, stupid and happy, but $ 3,000 a month will barely pay rent today,” Kendall said. “If someone is going to retire in 2021 at age 50, we have to think about what their expenses will be in 2031, 2041 and 2051. I think only people need to look at it with wide eyes because there are many variables that go into. to put the keys on the table and retire with confidence. ”

As a hedge against inflation, Kendall said savers should maintain a diversified investment portfolio that includes stocks that are likely to rise with inflation, such as Procter & Gamble (ticker: PG).

Colgate-Palmolive

(CL),

Verizon

(VZ), and

apple

(AAPL), which offers key consumer products and services.

“I remind people that toilet paper, toothpaste and cell phone bills are going up, so I think it has to be part of your portfolio to protect your long-term purchasing power,” he said. “I use these products as examples because everyone understands that we use them on a daily basis, and you need that kind of inflation-hedging investment in your portfolio because that’s where we spend money.”

Write to editors@barrons.com