It used to be the 40s and 50s were the prime working years when people could accumulate wealth and make those catch-up contributions to their retirement funds. In recent years, I've noticed a lot of my older friends are struggling with unemployment. According to a recent article by the New York Times, older workers have a more difficult time finding work once they lose a job. The article cites a report by the Labor Department that shows the average unemployment for an old person was 53 weeks compared to 19 weeks for younger people. Working in the downsizing media industry, I know I could easily be laid off. At age 40, I am trying to do the most I can with my money in case I face a jobless future after 50.
Focusing on dividends
I'm only investing in stocks that pay solid dividends because I want an income I can count on in case I'm jobless in my 50s. I invest in an individual account through the same discount brokerage company that handles my retirement accounts. I have to pay taxes on these investments, but it's worth it to build up a financial security system.
Tapping my Roth IRA
Although I won't be able to withdrawal money from my 401(k), I can take out any money that I put into a Roth IRA without paying penalties or taxes. I just can't touch the interest that I earned. It's extremely important that I max out my Roth IRA contributions each year so I can accumulate the most amount of money possible to access in my 50s if I have to.
Paying off my home by age 50
I set a goal to pay off my home by age 50 when I was in my 30s. I am still on track to have my home paid off in another decade. Refinancing when interest rates hit a low of 2.75 percent on a 15-year fixed made it easier for me to meet my goal of paying an extra $400 a month toward my mortgage.
Turning hobbies into profit
Another way I'm planning for a forced early retirement is by selling items using online auction sites. I want to build a good reputation now as a seller of collectibles and vintage items. If I become unemployed, I'll take the advice from the New York Times article and call myself "semi-retired." I know some semi-retired people who earn money editing books. However, the key for them was to start in their 40s and 50s instead of waiting until they were older to find clients.
It will take a solid decade of planning and preparation, but I'm confident I can replace all of the income from my 9-to-5 job when I'm 50 if I have to. If I am able to hang onto a job in my 50s and 60s, I'll continue to save for retirement. It's frustrating that I can't take anything for granted. After the recession, job security and pensions became a thing of the past. If I'm going to make it to 100 or older, I need to make smart choices now.
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More from this contributor:
- Personal Finance - Career & Education
- Retirement Benefits