5 Crucial Steps to Take if You Lose Your Job Close to Retirement
By Katelyn Washington,2023-02-07
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Losing a job is enough to make anyone stressed, but this can cause even more financial stress if you’re close to retirement age. While it is frightening, there are steps you can take to make this experience less painful. You can see if you can retire early without significantly impacting your original retirement goals. Even if that is not an option, there are resources available to reduce financial strain while you look for another job.
Reassess your budget
If you get laid off, cutting expenses is one of the first things you’ll want to do. Even if you have a sizable retirement savings, it’s best to leave it alone—if you can—until you reach the age you had originally planned to retire.
Your expenses might have changed since you lost your job. You’ll likely need less money for gasoline or fares without your commute. If you bought a cup of coffee before work or ate lunch out, these are more expenses you no longer have. While you can save some money without these extra purchases, it’s also wise to reduce other expenses if possible.
See where else you can save money by reevaluating your car insurance and other insurance policies. You can keep the lights low and try to use less heat or air conditioning to save on utility bills. You may even decide to downsize to a smaller home or apartment, which may save you money every month on your mortgage or rent, and/or insurance and taxes. However, even small changes can make a big impact, such as buying your groceries in bulk and cutting some of your entertainment expenses. For example, now is a good time to cancel some subscriptions that you don’t really enjoy.
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Apply for unemployment
Collecting unemployment can help lessen the burden of job loss. The amount you’ll receive depends on where in the U.S. you are located. Regardless of your location, unemployment is a temporary solution.
The amount and the duration of your benefits is limited. In Florida, for example, you can only collect unemployment for a maximum of 12 weeks or $3,300. However, some states have more generous regulations. Remember that guidelines change constantly. You should check with your state to see how collecting unemployment benefits can help supplement the income you’ve lost.
Collecting unemployment can help your financial circumstances while you look for another job, even if it is only a small amount. Remember that unemployment payments are taxed as income on the federal level, and some states impose their own taxes on them as well.
Check with Social Security
If you haven’t reached full retirement age yet, there is a possibility you can still collect Social Security retirement benefits. Social Security allows early retirement at age 62, but this option is not for everyone. You should consider whether collecting benefits is in your best financial interest before applying.
Collecting benefits early can result in a reduced monthly benefit amount. The earlier you retire, the more your benefits will be reduced. You might see a reduction of up to 30%. If you can delay collecting Social Security, even by a few months, you could receive significantly larger monthly benefits and that could make a big difference to you later in life.
There are resources available to help you determine how much you can get in Social Security. You can create a my Social Security account or use the benefits calculator on the Social Security website to estimate benefit amounts.
Consider a part-time job
You can work a part-time job even if you choose to collect retirement benefits. Working during retirement is one of the best ways to supplement Social Security income and could relieve some of the financial strain of losing your job.
Social Security will not reduce your benefits as long as you don’t exceed certain income thresholds. If you collect benefits before full retirement age, you can earn up to $21,240 without affecting your benefits. That threshold increases to $56,520 if you have reached the full retirement age.
Some retirees choose to open their own businesses. This might prove to be a good option if you have a good business plan that doesn’t require significant start-up costs. While this might not produce income immediately, it may help alleviate financial burdens later, which can occur if you choose to dip into your savings accounts now.
Evaluate your investments
Utilizing your investments is one way to help with living costs without tapping into your retirement accounts. Withdrawing from some retirement accounts could come with tax penalties, so you should carefully consider other options before doing so.
If you have a financial broker or planner, you can speak with them about your situation. They can help you determine if it is a good time to sell or trade any stocks that you might have, or to reinvest in investments that produce more income, such as dividends or interest. It’s typically not wise to sell these investments when the market is down, and you might still face tax burdens if choosing this option, so it’s best to do your homework and consult with a professional.
Don’t forget to evaluate your other investments, such as properties. You might make a sizable profit from selling properties in a good housing market. Some retirees also choose to rent out part of their homes, which can provide passive income, as well as some companionship.
It’s never a good time to lose your job, but if you are nearing retirement, it’s especially bad timing. Getting laid off does not have to ruin your retirement plans. Making wise decisions now will help prevent you from further financial loss. There are many ways people throw money away, but if you budget carefully and utilize the available financial resources, you might not need to sacrifice your dreams for retirement.
Losing a job is always a blow, personally and financially. Losing a job close to retirement is especially frightening. But there are some steps you can take to protect yourself.
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