As big as these numbers sound, they only represent 3 percent of the workforce. And many of the people who left their jobs last year weren’t actually ‘quitting.’ They were retiring. One million people were ‘normal’ retirements, and an additional 1.5 million chose to retire early.
If you’re also considering retiring early, there are a few things to know about doing so during the Great Resignation.
When you transition to a new job, you’re probably thinking about pay and benefits, not Social Security. But time spent unemployed could cut into your long-term benefits.
For example, if you’re unemployed for 12 months, this means you’re not putting into Social Security. This matters because your Social Security benefits in retirement are determined by how much you earned and how old you are when you apply.
You only need to work for 10 years to qualify for benefits, but the Social Security Administration goes by your 35 highest-earning years. Therefore, chunks of time spent out of work can decrease your lifetime earnings.
If you plan to stop working, your 401(k) plan can be an attractive way to get money. According to a survey from Kiplinger’s Personal Finance and Personal Capital, nearly one-third of people with at least $50,000 in their retirement accounts withdrew from them in 2020. And nearly 30 percent took a 401(k) loan during this same period of time.
Taking money from your 401(k) can set you back years. To avoid having to work an additional few years, avoid tapping into your retirement savings. If you have no choice, talk to your financial advisor about your options, as some cash out retirement funds are better than others.
Other Retirement Funds
If you do decide to join the Great Resignation, make sure that you have all of your retirement money that you’ve built up at your jobs. An estimated one million 401(k) plans are forgotten about each year. Don’t let yours join this number. If you’re changing jobs, you could benefit from a rollover IRA. Also consider the benefits you could be missing out on, such as unvested 401(k) matches.
If you’re interested in joining the Great Resignation, schedule an appointment with Leonard Financial Solutions. We can help you understand your personal needs, including your debt, finances and healthcare costs.