Coping with unexpected unemployment just before retirement
The following is presented for educational purposes only. It is not intended as investment advice.
A reader recently reached out for advice. Their position had been unexpectedly terminated and they were considering whether or not to retire (earlier than they would have liked) or if they should look for a new job. They enjoyed working, but weren’t sure which path to pursue.
Losing a job at any stage of your life is difficult. There can be a range of feelings to cope with, in addition to financial concerns. If you’re approaching retirement and have found yourself unexpectedly out of work, consider the following advice.
File for unemployment
If you haven’t already, be sure to file for unemployment benefits immediately. Eligibility varies state-by-state. The total amount will not be as much as your salary, but it can help with financial gaps.
Figure out health insurance
COBRA health insurance is often an option when you lose your job. Depending on your age, you may be eligible for Medicare. Going without coverage for an extended period of time can be dangerous, so make your health and wellbeing a priority.
Know your budget
Don’t make assumptions about your finances. A great way to be objective is to create an up-to-date budget. Here’s a free online budget calculator offered by Clearpoint, a division of Money Management International (MMI).
Reduce unnecessary spending
As you’re considering your long-term options, it’s a good idea to pare down your spending until you have a firmer idea of what you can afford. Take a look at whether there are other possible spending adjustments such as reducing internet, cable, phone, and insurance costs by calling each company. I do this periodically myself. It does take time, and the process is not always fun, but the end result of saving some money is satisfying!
Evaluate your retirement options
Part of this evaluation is what you want from and how you feel about retirement. Some folks are eager to retire and have a clear idea of what they want to do with newfound free time. Other folks are less clear on what they want to do with the additional free time.
Another part of this evaluation is the number crunching. Depending on your financial situation and age, it may be very worthwhile to continue working so that your Social Security benefits continue to grow. Here are some online Social Security calculators that help with “what if” scenarios.
Leaning towards staying in the workforce a little while longer? There’s a recent study that may be of interest to you. The study compares the power of saving (to build up a nest egg) versus working even a few months longer to increase Social Security benefits. If you’re concerned about not having enough saved, this is good information to consider.
This is also a good time to review your current budget and compare it to your projected Social Security benefits, plus any other retirement resources, such as your IRA. Do you have enough income to cover your budget expenses and to handle increased costs over your lifetime? Be sure to consider the impact of your life expectancy on any withdrawals you make from your IRA. Here’s a link to a very basic life expectancy calculator.
Retirement is a major milestone and a decision you should feel confident in making. Taking some of these steps can help support you in the short-term while you decide which path best matches your personal goals. Whatever decision you make, we wish you the very best of luck. And don’t forget that MMI offers a variety of services to support consumers throughout their senior years, should you ever need our assistance.