Losing a job can be a huge blow at any age. But when you’re in your 60s, it can be an even harder struggle.
Although it’s illegal for employers to discriminate against job candidates based on age, it happens frequently and it’s hard to prove if it happens to you. AARP reports that 74% of job seekers aged 50 and over have concerns that their older age will be an impediment to being hired.
If you’re in the position in question, it could make for a difficult financial situation. Plus, you’re still a year away from being able to claim Social Security benefits.
While you’re old enough to access a 401(k) or IRA without facing an early withdrawal penalty, tapping one of those accounts at 61 could lead to a savings shortfall later on.
There’s also the issue of health insurance to think about. If you were covered through your job, you’re still four years away from being eligible for Medicare.
Here’s how to handle this unfortunate situation on a short- and longer-term basis.
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Plan of action: Up to 3 months
Losing a job can be a shock, so you may need a few days or even weeks before you feel ready to dive into a job search. But one thing you should do immediately is file for unemployment benefits.
Typically, you’re eligible for up to six months of benefits if you lose a job through no fault of your own and meet your state’s earnings requirements. Unemployment benefits won’t replace your full paycheck, but at least you’ll have a portion covered.
You should also talk to your employer about severance, if applicable. And if there’s no severance package, see if you’re entitled to be paid out on accrued vacation or sick days you never used. That could add some extra money in your bank account while you figure out your next steps.
Additionally, it’s time to assess your emergency fund to see how many months of bills it can cover. If you’re able to cut back on spending, between lower expenses, your wife’s paycheck and unemployment benefits, you may be able to get away with minimally tapping your emergency fund while you start your job search.
You’ll also need to figure out next steps regarding health insurance — check to see If you can get onto your wife’s job plan (if it offers health benefits).
The Consolidated Omnibus Budget Reconciliation Act (COBRA) may be an option, as it allows you to retain your employer coverage for a period of 18 to 36 months. But it can prove to be extremely expensive, since you’re effectively paying the unsubsidized rate for your old health plan. You may find that a marketplace plan through healthcare.gov is cheaper, especially if you qualify for a subsidy.
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Plan of action: Months 3 to 12
This is the time to be aggressively job-hunting. Until you’re able to find a full-time job, it’s important to preserve your savings — both your emergency fund and your retirement nest egg.
If you’re still unemployed at the six-month mark, look at gig work, a side hustle or a part-time job when your unemployment benefits run out. That way, you’ll have some income coming in while you continue looking for a full-time job.
It’s also important to look at your retirement portfolio carefully. If you weren’t planning to use that money for another five years or longer, you may have a larger portion of your portfolio in stocks. If it’s looking like you may need to tap into your nest egg sooner, shift a portion of your portfolio out of stocks and into assets that are stable, such as bonds and CD ladders.
The good news is that interest rates are still pretty strong, so you can earn a decent return from a CD ladder without taking on the same risks you do with other investments. You can even keep a chunk of your retirement funds in a high-yield savings account, for added flexibility.
Plan of action: 12 months and beyond
It can be discouraging once you’ve reached the 12-month mark of being unemployed. But keep the faith and don’t give up!
It could make sense to shift away from seeking a full-time job and see if you can get by with a couple of part-time jobs or expand your side hustle to tide yourself over until retirement.
Of course, you may not end up being able to earn the income you want in the coming years, so you’ll need to figure out if you can maintain a pared-down lifestyle to avoid draining your nest egg early.
By now, your home may be paid off. If so, downsizing is an option. It could allow you to not only lower your housing costs, but walk away with some equity you can use as income.
Another option you can look at is claiming early Social Security. You’ll face a permanent reduction in benefits if you don’t wait until age 67 to claim them, since that’s your full retirement age based on your year of birth. But if you’re scared to tap your retirement funds and can only reduce your expenses so much, at least it’s on the table.
Depending on your situation, it could make more sense to tap your savings than to claim Social Security early. If you get a full-time job at the 18- or 24-month mark, you can replenish your savings then. But once you claim Social Security early, you’re generally locked into the lower monthly benefit for life.
Looking on the bright side, if your financial situation permits, you could leverage your current lower income by converting some retirement funds to a Roth IRA, which offers tax-free withdrawals in retirement.
Keep in mind, though, that you’ll need to pay taxes on the converted amount in the current tax year. If you’re experiencing financial difficulties, adding this tax burden might not be the best choice right now.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
