Workers in their 50s and 60s are facing the prospect of getting laid off just before the retirement door is about to open in front of them.
According to a recent study at the Urban Institute and ProPublica, more than half of workers find themselves up against this new challenge after age 50.
The research also notes that only 16% were still working at age 65, with many forced out of the workforce for an extended period or having to accept lower-paying jobs.
If you are about to retire in the immediate future but find yourself without a job, here are six proactive steps you should take in order to take more control over your unfortunate situation.
Reassess your savings
Consult with your financial advisor to evaluate asset allocation, take stock of your savings, and determine lifestyle changes you need to make.
Appraise your expected income and projected cash flow from your previously accumulated assets, and decide on the course of future action based on your current situation.
Update your budget
Revisit your expenses. You may not be able to reduce certain fixed expenses like rent, groceries, utility bills, and mortgage payments.
However, you can certainly refrain from expenses like dining out, next vacation, or the house renovation. Postpone these expenses until you have more clarity about your financial future.
Claim unemployment insurance
If you have been earning well till now, chances are you might overlook the modest unemployment benefits. You should not ignore this income stream, however small it may be, that can help you meet some basic expenses.
There is every reason to file for unemployment insurance and claim the money you are entitled to, once you are eligible.
Check your Social Security choices
You must be at least 62 to be able to collect 75 percent of your monthly Social Security benefits, while you are eligible for full retirement benefits at age 67.
Ideally, you must wait until retirement age to claim benefits. However, in the absence of an emergency fund or any other source of income, you may augment your cash flow by claiming Social Security with reduced benefits.
Please note that you may be able to collect reduced unemployment benefits if you claim Social Security benefits at the same time.
Get health insurance
One of the major concerns for unemployed workers, apart from lost income, is the loss of their health coverage. Enroll in Medicare if you are over 65.
If you are not 65 yet, you can keep your old health coverage by paying for COBRA. Keep in mind though, that you may need to pay the full premium for your health insurance coverage.
You could also choose to buy a new health plan and can still continue to use your health savings account (HSA) for expenses even after being laid off.
Plan your taxes for low income
Consult with your tax advisor to look at tax planning opportunities like converting to a Roth IRA from a traditional one, selling appreciated stock, and maximizing IRA distributions.
Carefully consider each aspect of your financial life, and look for possible opportunities that could lead to tax savings.