Losing a job can be a devastating financial blow at any age. But as you get older, it can be particularly hard hit. It is illegal to discriminate against job seekers because of their age, but it is difficult to prove. And unfortunately, many elderly workers are inevitably victims of age discrimination. That’s why 59 layoffs can be indeed brutal.
Giving up millions of dollars in savings at 59 is one thing. But if you’re sitting on a 401(k) with a $800,000 balance, it may not be a nest egg big enough to support a fairly early retirement.
However, this situation is not hopeless. And with the right strategy, you can make it work.
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Pause, breathing…and think about what you want
A recent survey by the Employee Benefits Institute found that around 40% of retirees left the workforce earlier than planned. If you are fired at 59, it can easily lead to an unexpected early retirement, said Evan Drury, Financial Advisor at CHFC and Financial Services LLC.
Drury has previously seen clients land in this situation. And the first question he likes to ask is, “What do you want?”
If a client wants to continue working full-time for another five years to maximize revenue and savings, that’s one thing, he explains. If they are happy to move to part-time or freelance work, that’s another thing.
If you want to lock down another full-time job so you can save a few more years, Drury says you can use it for your profits rather than making your age a disability.
“I have a wealth of experience competing with others in the market,” says Drury. If you are actively networking and maximizing your skills, you don’t know what opportunities will present yourself.
On the other hand, you may find that part-time work is a good solution for you. It covers costs and allows nest eggs to be exposed for several more years, but perhaps escapes the frustration of trying to get a full-time job.
Drury had a client who was fired years ago at the age of 65 and was unable to retire at that time, so he encouraged her to find the best job she could. They landed on a hybrid retirement where she earned part-time income and took a small share from her portfolio.
“Retirement means a lot of different things these days. Retirement is not the only approach,” Drury argues.
Make the numbers work
Being fired later in life can be a shock and can take time to recover emotionally. But one of the important things is to assess your financial situation and find out what you’re dealing with, according to Drury.
First, he will review your cash flow based on your current expenses and available income. In the near future, it could be a combination of small portfolio withdrawals and unemployment benefits.
Next, we will consider trimming the cost and what it looks like. At 59, your home may be rewarded or close to it. If you can shrink, you may leave with a lump of money you can invest and use for your income. It may also reduce housing costs.
Drury says you need a sense of what your expenses will look like for the next few years. This helps to help you decide whether you can afford to work part-time rather than needing a full-time job.
Unfortunately, at age 59, he is too young to get Social Security. And since Drury likes to remind people, 62 is the earliest age to sign up for it. This means that for quite some years you may have to live with the combination of portfolio distribution and any income you bring.
A $800,000 balance of 401(k) earns only $32,000 in annual income using the 4% rule. And it may not even be safe to use a 4% withdrawal rate at age 59, so it’s something to consider when deciding whether to pursue full-time and part-time jobs.
This, of course, assumes that you can access without a penalty of 401(k). In these circumstances, it must be 59½ to be 59½, but the 55 rule may apply, allowing you to access that money early.
The last puzzle of the numbers is healthcare. At 59, you are too young for Medicare, so if you decide to continue working part-time between now and 65, you may have to shop for a plan to pay for yourself.
Pay to get help
This situation is definitely difficult. If that happens to you, don’t hesitate to get help from different resources. That means talking to recruiters and career counselors and leaning into your social and professional network for support.
Drury also recommends talking to a financial expert about your options. He argues that 59 layoffs are an opportunity to “make your desires a reality.” However, there is a need for planning and the finances need to support it.
