If you’re fired or laid off from a job later in life, it’s a gut punch. No doubt, it could lead to financial disaster. Here are a few things you can do to lessen the damage, according to Kiplinger’s.
Many people are finding themselves out of work right now, and some may be getting close to retirement. If you suffer a job loss near retirement, there are steps you can take to make sure your finances are safe.
1. Assess and Adjust Your Budget
Do you know what you are spending money on every month? One of the first steps you should take after a job loss is assessing your budget. Sit down and make a list of all of your expenses. Determine what is essential, like your mortgage, car payments and health care. Are there places where you can cut back? You could get rid of cable or any streaming services. This may be difficult, but a smaller income means you need to have fewer expenses.
If you are close to retiring and hit with a job loss, depending on what your budget shows you, you may have to delay your retirement. This is a tough situation, and it’s an important time to meet with a financial adviser to see what may be the best plan for you.
This is an excellent time to look at what you have saved. If you were a budgeter before you lost your job, you should have a substantial emergency fund saved. Look at all of your accounts and calculate how long they will last. If you are out of work for six months, will your savings last you?
Between employee retirement accounts and any personal retirement accounts you may have, you need to understand how much you have set aside.
If possible, roll your current 401(k) accounts into an IRA. There are many low-cost investment options. You can roll your 401(k) into a traditional IRA without paying any income taxes. Or you can roll your contributions into a Roth IRA and pay income taxes now, so you can take money out, tax-free, in retirement. This will also help your money continue to grow, tax-free. By rolling your accounts into a traditional or Roth IRA, you are putting this chunk of your money in one place, making it much easier to keep track of.
3. Assess Your Social Security Options
Are you eligible for your Social Security benefits? The earliest you can take Social Security benefits is 62 years old. For people born in 1960 or later, the full retirement age when you can collect 100% of your benefits, is 67. Claiming your Social Security benefits at 62 will lock you in at a lower amount because you need these benefits to last longer. If you wait until after 67 to claim them, they will grow 8% each year you wait until age 70.
Financial planners usually advise waiting until the full retirement age to claim Social Security, but if you need income, this can be a good option for you.
4. Have a Plan in Place
Whether it’s losing a job or encountering another type of financial crisis, we have to be ready to face it. Having a plan in place for that possibility is the best way to protect your finances and keep your retirement on track.
