Late-Career Job Loss? 3 Ways to Protect Your Retirement

For many of us, retirement planning starts with an age. For some people, that may be 62 or 65. Others may work until 70 to maximize Social Security benefits. Whatever the reason, our planned retirement age is a goal. But what happens if your career ends earlier than expected? It’s a problem playing out in real time. While the August jobs report revealed a more resilient labor market and a steady unemployment rate (4.1%) overall, the information industry lost 23,000 jobs. The ADP National Employment Report showed private payrolls rose by only 38,000 in August, less than the 46,000 added in July and below the 47,000 economists expected. When you’re in your 50s or 60s, an unexpected job loss combined with a prolonged job search can dramatically disrupt years of retirement planning. Losing income during those final high-earning years can put additional pressure on savings or force you to make significant financial decisions earlier than planned. The smart move is to build flexibility into your retirement plan in case the worst happens. This can help prevent emotional decision-making — such as choosing to drain retirement accounts or claiming benefits earlier than expected — which can have long-term consequences. 1. Get your financial life in order — and don’t forget healthcareUnderstanding what your finances would look like if you suddenly lost your paycheck is the first step in preparing for the unexpected.About Adviser IntelThe author of this article is a participant in Kiplinger’s Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.Start by reviewing fixed and discretionary expenses, available savings and any other sources of income to determine how long you could realistically maintain your lifestyle without working. While many financial professionals suggest three to six months’ worth of emergency savings set aside, returning to work may take longer than that because of the slower job market. Aiming to save more will keep you better protected, especially if you become ill or no longer able to work. Knowing how much money you need each month can also help you identify expenses that can be cut before you begin withdrawing from long-term savings.A sudden loss of employment may also mean losing health coverage. If that happens before you’re eligible for Medicare, options such as COBRA may come with substantially higher premiums that could drain savings. Factoring healthcare coverage into any scenario involving unexpected job loss can help buy you more time to consider your options and protect savings. Having funds outside of retirement accounts can offer another layer of protection. This reduces the need to sell investments or begin taking retirement distributions to cover expenses. This becomes especially important if sudden unemployment coincides with market volatility — when selling investments may lock in losses or reduce the amount invested for a potential recovery. 2. Stress-test your retirement plan nowUnderstanding what would happen to your retirement plan in the event of a sudden job loss is also part of the preparation. Stress-testing your plan by running it through different scenarios can help you understand how your finances would be impacted if your current situation changed. For example, you could model what would happen if you stopped working now, retired several years earlier than your target age, or began withdrawing from savings prematurely. If you lose your job unexpectedly, retirement doesn’t have to be the next step. Before claiming benefits or making withdrawals, consider how that could impact your retirement. Working through different scenarios can help determine whether relying on those sources of income now makes sense, or whether continuing to work would leave you better off in the long run. 3. Stay connectedIn addition to financial preparation, keeping your professional skills and network up to date can give you more options if you find yourself looking for work. This includes maintaining required licenses or designations as well as staying connected with people in your industry. Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Keeping up with changes in your field later in life can make it easier to pursue another position if you lose your job, rather than feeling forced into retirement. For many of us, the age at which we hope to stop working is the first step in retirement planning. But that timeline is subject to change at any time. Preparing for the possibility of a sudden job loss, building flexibility into your retirement plan and stress-testing it under different scenarios will help you understand how to move forward without minimizing benefits or sacrificing years’ worth of savings. Related ContentMy Wife Was Laid Off at Age 64: Here Are 5 Questions We’re AskingFacing a Potential Job Loss? Here’s How to PrepareDon’t Let Health Care Costs Wreck Your Retirement: Here’s HowAn Expert Guide to Calculating How Much Money You Really Need in RetirementI’m a Financial Adviser: This Is What You’re Really Losing if You Cut Back on Your 401(k) ContributionsChris Cohan is a registered representative of and conducts securities transactions through CoreCap Investments, LLC. Chris Cohan is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. NJP Estate Planning is a separate entity and not affiliated with CoreCap Investments or CoreCap Advisors.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.