Age discrimination exists. It is an unfortunate fact, held up by statistics.
In 2014, the AARP Public Policy Institute's Future of Work@50 sponsored a survey that examined how Americans over 50 had fared since the Great Recession. The resulting study, The Long Road Back: Struggling to Find Work after Unemployment (opens in new tab), reported that 50% of older workers who had become unemployed in the prior five years were not working. Of those who did find work, 48% reported earning less than they had with their previous job. And that deficit could be substantial: A discussion paper by the Urban Institute’s Program on Retirement Policy (opens in new tab) found that re-employed men ages 50 to 61 received a median hourly wage that was 20% less than they had received previously, while men over 62 took a 36% salary cut.
If you’re currently unemployed or furloughed, I suggest that you realistically consider your chances of re-employment. Don’t continue to act (and spend) as if you’ll soon be receiving your former income — even if you’ve been furloughed. “Call it realism or pessimism (opens in new tab),” writes Christopher Rugaber of the Associated Press, “but more employers are coming to a reluctant conclusion: Many of the employees they’ve had to lay off in the face of the pandemic might not be returning to their old jobs anytime soon. Some large companies won’t have enough customers to justify it. And some small businesses won’t likely survive at all despite aid provided by the federal government.”
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I’m not saying these things to depress anyone — just the opposite, in fact. When it comes to your finances, I believe it’s best to plan for the worst and hope for the best. If you can be OK with a worst-case scenario, you’ll feel even better if the worst doesn’t happen.
To create a plan that can help you get through an open-ended period of unemployment, I suggest you:
Evaluate your financial situation
When considering your finances, assess your condition as if you are not returning to your previous position. What other sources of income do you have? What expenses? Do you have any benefits available to you? Create a cash flow plan so that you can see exactly where you are financially, and where you want to be.
Make any necessary changes
If you’ve unexpectedly lost your job, you may need to cut back on expenses. Put everything on the table. Do you really need two cars, or can you sell one? Is it time to downsize your house? You don’t need to make every cutback you ascertain, but I do think it’s important to identify any expenses that can be reduced, and to seriously consider them.
Think about taking Social Security early
Though you may have planned to wait to take Social Security later, don’t discount taking it before your full retirement age. In fact, you may want to take it for a year as a sort of interest-free loan. That’s right: If you are 62 or older, you can opt to take your benefits and then change your mind. If you do so within 12 months, you can withdraw your Social Security application and repay the money you have received without interest, (although you will need to include any money withheld for Medicare (opens in new tab) premiums or taxes).
Don’t skip health care
If you’re eligible for Medicare, congratulations. If you’re not, can COBRA carry you until you’re 65? Or can you find a good plan on the marketplace? No matter what, don’t court disaster by leaving yourself or your family uncovered.
Adjust your investment strategy
At my firm, we believe that people over 50 should invest conservatively since they may not have the time to recover from large losses. If you are over 50 and unemployed, I think a defensive approach may be even more important, and suggest that you carefully consider the risk in your portfolio relative to the financial situation you face and modify your investment strategy accordingly.
If you’ve been laid off or furloughed, I truly hope that you find employment again soon at your previous salary or better. But if not, I hope that by planning for the worst, you’ll survive and even thrive.
All expressions of opinion reflect the judgment of the author, Ken Moraif, as of the date of publication and are subject to change. Ken Moraif is a controlling owner and investment adviser representative of MMWKM Advisors, LLC, doing business as Retirement Planners of America, which is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that Retirement Planners of America has attained a certain level of skill, training, or ability. Readers should not rely on the content as the sole basis for any social security or investment decisions. A professional adviser should be consulted and/or independent due diligence should be conducted before implementing any of the options directly or indirectly referenced. This should not be construed as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice. Retirement Planners of America makes no warranty, express or implied, for any decision taken by any party in reliance upon the information discussed. While information presented is believed to be factual and up-to-date, Retirement Planners of America does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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