Laid Off Near Retirement? How to Prepare for What’s Next

1. Measure your runway.

First, take stock of your cash and liquid reserves and prepare to slash choice expenses in your budget. Once you’ve recalculated your monthly expenses, you can then figure out how long you have before you run out of funds.

Between those reserves and a tighter budget, you should hopefully have enough runway to find another job without rushing into the first opportunity you stumble upon. This way, you can find a job that better fits your financial plan and personal priorities. After all, this is an opportunity to do something meaningful in the last phase of your working life.

2. Use this as an opportunity to build up your tax-free bucket.

If, after measuring your runway, you anticipate being low on funds within the year, plan on rolling over some of your distributions from your pre-tax bucket (401(k), IRA) to your tax-free bucket (Roth IRA, cash value life insurance).

The reason? Income-taxable distributions from 401(k) and investment accounts have a significant tax cost once withdrawn — so now may be an ideal time to take advantage of today’s tax rates for later distribution.

3. Audit and update all your accounts.

Now is a great time to handle the financial housekeeping many of us unconsciously set aside when we are busy working.

To take advantage of the unstructured time while you have it, get a bird’s-eye view of your post-retirement income, including Social Security benefits, pension benefits, employer retirement plans and other investment vehicles. With some calculations, you should be able to determine the minimum amount of money you need to invest to keep your plans on track. 

From there, review your various financial accounts — whether it be checking and savings accounts, IRAs, 401(k)s, life insurance plans or other investment vehicles — to ensure all the beneficiaries named are up to date and reflect who you want to pass those funds to when you are no longer living. For example, if you’re divorced and remarried, you probably wouldn’t want your former spouse to inherit your assets over your current spouse, just because you never updated your beneficiary forms. 

Next, take care to tackle any administrative work you’ve been putting off and update your legal and estate planning documents with your estate planning attorney. These include your will, health care directive and power of attorney. Should you experience an unexpected decline in physical and mental capabilities, updating these documents is crucial to receiving the end-of-life care best suited to your personal situation. 

If there are no further gaps (or they are easy to manage), you may discover that you have the opportunity to pursue a passion project rather than another job. And if you played your cards right, this may even be a chance to start the business you’ve always dreamed about.

4. Address your long-term care plan.

While it’s nice to believe we’ll all live independently in retirement, it’s also important to create a fund for long-term care. While some federal and state programs will help with medical costs (e.g., for hospice care), they don’t often cover assisted living or long-term care except in select cases. By putting together a long-term care plan now and obtaining insurance for it, you’ll gain peace of mind knowing your future will be cared for.

Remember: This moment is an opportunity

Getting laid off at this critical juncture can be an eye-opening experience for near-retirees. The newly freed time presents them with an opportunity to reassess their values, visions and dreams.

While this is certainly a stressful time, taking these steps can help give you the comfort you need to envision the next chapter in your life — and the means to make it happen.

This article has been obtained from an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU, Executive Vice President of the Georgia Alabama Gulf Coast Branch. Equitable Advisors and Equitable Network do not offer legal or tax advice and make no representation as to the accuracy or completeness of this information. You should consult your own legal and tax advisors regarding your particular circumstance.  Stephen Dunbar offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN). Annuity and insurance products offered through Equitable Network, LLC. Equitable Network conducts business in CA as Equitable Network Insurance Agency of California, LLC, in UT as Equitable Network Insurance Agency of Utah, LLC, in PR as Equitable Network of Puerto Rico, Inc. GE-5757557.1 (6/23) (Exp. 6/25)

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.