Getting laid off in the late innings of your career can make your retirement goal seem all but unreachable. Just remember that you still have options. “The most important thing is not to panic,” says Thomas Dietrich, first vice president at SunTrust Investment Services in Gulf Breeze, Fla. “Take a deep breath. The best decisions are made when you take control.”
Here are four key steps that can help you get back on track:
1. Take stock of your current finances
First, consider how your current budget will be affected by the layoff. Dietrich recommends reviewing your cash and investment accounts to create an overall budget. Reduce your discretionary spending and focus on necessary expenses like bills and insurance premiums. Your goal: identifying the sources of cash flow necessary to cover your current living expenses.
2. Review your retirement picture
How close were you to meeting your retirement goals when you were laid off? If you’re lucky—and you’ve made retirement savings a priority for your entire career—you may be able to retire today if you adjust some of your assumptions. For example, does your retirement outlook improve if you factor in less travel or reconsider buying that vacation home? If your current savings aren’t sufficient to generate the retirement income you need, you may have options for closing that gap, such as claiming your Social Security benefits earlier than you’d originally planned. “A financial advisor can show you how best to utilize your assets to fill any gaps in your income while you are positioning yourself for your next steps,” says Dietrich.
3. Seek a new job
Another option to closing that income gap is taking on full- or part-time work. Depending on your situation, you may be in a position to pursue an encore career—a new path that leads to fulfillment of a long-time passion. Assess your skill set and what you want from this stage of your career. Consider choosing a job that lets you pursue a new passion, says Dietrich, even if that means earning less money. Provided, of course, that your budget and financial situation allow it.
Remember that if you decide to retire early or if you end up taking a part-time job, you may need to replace benefits that were once provided by your employer, such as health insurance or life insurance. Medicare coverage isn’t available until you are 65. Dietrich suggests applying for coverage through COBRA under your former employer’s health insurance while you review your other possibilities, such as joining your spouse’s plan or seeking coverage through the new health insurance exchanges.
Taking a time out to consider your situation and plan for the future can help make this whole process less stressful, says Dietrich. “It can feel like a life-ending event, and it is for life as you now know it,” he says. “But the key is to recognize that this might be a gateway to new and better possibilities.”