Temporary job loss has been part of the pandemic. But is it time to retire right now?

Many people look forward to retirement their whole working careers. They imagine the places they’ll travel, the time they’ll spend with their grandchildren and they look forward to pursing hobbies and recreational activities.

But what happens when that anticipated retirement comes sooner than expected?

That’s what has happened to many Americans over the age of 55 as a result of the COVID-19 pandemic. During a one-year period beginning in February 2020, about 1.45 million people in this age bracket lost their jobs. The so-called Labor Force Participation rate for this group dropped from 40.3% to 38.3%.

Job loss has been a well-documented result of the pandemic, but the evidence suggests that younger workers are going back to work while many older workers may be out of the workforce permanently.

At my company, several clients who had planned to retire in a couple of years decided to toss in the towel because the pandemic caused their jobs to be redefined and added to their stress levels. Others found themselves without work and figured they’d just call it quits for good.

On the other hand, older employees who remained employed often decided to work longer, according to an AARP report. A total of 32% of 50-somethings said that current conditions made them plan to delay retirement and 21% of employees in their 60s planned to delay retirement, too.

There’s plenty of stress around the retirement issue. It’s easy to understand why: It can be tough to figure out whether you’ll have enough income to retire successfully.

As one client told me, “I hope my questions don’t seem silly because you have to understand that I’ve never retired before.”

There are no silly questions here. This is time for some serious contemplation. Here are some things to consider as you approach retirement.

▪ Calculate your spending and whether you have enough income to support it.

Look at your sources of income, like pensions, Social Security and annuities. Compare that to your expected spending to see if there’s a shortfall — which there often is.

Next, figure out how to make up that shortfall. Determine how much income your savings and investments could generate. A good rule of thumb is that you can withdraw 4-5% of your nest egg each year to meet your spending needs. A higher withdrawal amount means you may be spending too much and could run out of money later.

If you have an investment account, your investment company probably has an online calculator that will be helpful. There also are some free calculators online.

▪ Understand how to get money out of your accounts and the tax repercussions of those withdrawals.

If you’ve been saving and investing for retirement for years, it can seem counter-intuitive to take the money out.

Different types of accounts will be taxed at different rates when money is withdrawn. Retirement account redemptions are taxed as ordinary income. On the other hand, if you meet certain conditions and own a Roth IRA, it won’t be taxed when you take money out. Non-retirement investment accounts will incur capital gains taxes. Understanding these differences will allow you to control your income taxes and keep more of your money for longer.

If you want a steady, fixed income stream for life, consider an immediate annuity.

▪ Don’t overlook the cost of health care.

Many people lose their health care coverage when they retire. It can be a challenge to transition to private insurance or Medicare.

If you retire before the age of 65, your options include COBRA (a continuation of your employer benefit), private insurance through the federal health care exchange or private insurance through insurance carriers or brokers.

Coverage can be expensive, so consider this before retirement. People often continue working part-time after they “retire” just to get health insurance coverage for themselves and their families.

Medicare is available for those age 65 and older. Since Medicare doesn’t cover all health care costs, you also need to consider Medicare supplements (often called Medigap policies) or Medicare Advantage plans.

▪ Review Social Security options carefully.

If you’re in good health, taking it as early as possible (age 62) might not be the best option. Most people retiring now reach Full Retirement Age (FRA) at age 66 or 67. Waiting until FRA increases your benefit.

Even better, you get an 8% permanent increase in benefits for each year you wait beyond FRA.

Many people spend more time planning a two-week vacation than they do for retirement. If the decisions seem daunting, this may be the time to consult with a qualified financial adviser.

Remember, you may spend one-third of your life in retirement, so plan carefully to make your golden years truly golden.

Barbara McMahon is a CERTIFIED FINANCIAL PLANNER professional and member of the Financial Planning Association of Greater Kansas City. She is the president of Innovest Financial Partners in Kansas City; securities and advisory services offered through an Investment Advisor Representative of Cetera Advisors LLC; Member FINRA/SIPC, a broker dealer and registered investment adviser. Innovest Financial Partners Inc. is independent of Cetera Advisors LLC, 601 E 63rd St., Suite 220, Kansas City, MO 64110, 816-363-6660