After a year of layoffs and rumors of a potential recession, what will 2024 look like for the job market? According to Randstad RiseSmart’s 2023 Global Severance report, 92% of employers are predicting more layoffs. But what happens if you find yourself out of a job right before you’re set to retire?
In times of economic uncertainty, it’s best to expect the unexpected. Even if you are confident in your current job status, planning for a job loss will set your finances up for success if it should happen.
File for unemployment
The current unemployment rate sits at 3.7%, according to the Bureau of Labor Statistics. If you find yourself in this position, filing for unemployment could be a good place to start. How much will you receive from unemployment? That depends on where you live. Each state has its own rules for how unemployment is paid out, as well as how long it lasts.
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For example, in Florida the average length of unemployment pay is 12 weeks, but in Wisconsin it is 26 weeks. Filing for unemployment and collecting this money as soon as possible is your first step. At the very least, this allows you to continue paying your bills and gives you time to evaluate your employment options if you are hoping to retire soon.
Consider other income sources
Depending on your situation, you may need to find a part-time job before you can retire full time. More people than ever before are working into their 60s or 70s. One in five Baby Boomers are delaying retirement due to the state of the economy. While many may be working to stay busy, others need to continue working to afford retirement. If you are someone who does not want to work in retirement, make sure you are saving enough ahead of time.
Ideally, you are putting away at least 10% to 15% of your income into retirement accounts during your working years. How much will you need to live a comfortable life in your golden years? Most people believe they will need more than $1 million to retire comfortably. Start saving now to save yourself trouble down the road!
Take a look at your savings
Between your retirement accounts, Social Security and your personal savings, you need to know how much you have saved. Once you have a good idea of what you have, you can figure out how much money you can withdraw from those accounts and where to take it from.
After you assess how much you have in savings, calculate how long it will last after a job loss based on your current expenses and budget. Remember, your expenses will be different once you retire. You have to take into account health care as well as any travel and other large expenses. You want to ensure that your money lasts throughout retirement, which could be decades or more!
If you don’t already have one, now is the time to create a budget and stick to it. A financial adviser can help you take a closer look at your savings and help you create a retirement budget to fit your needs.
Assess your Social Security options
If you are at least 62 years old and you find yourself without a job, it might be smart to start taking your Social Security benefits before you hit full retirement age (FRA). While retirees have no control over rising costs, they do have control over when they claim their Social Security benefits.
Remember, claiming benefits before FRA results in a permanent reduction of as much as 30% of your benefit. I recommend clients wait to claim Social Security benefits until their FRA, but if you need the income, this could be a good option for you.
If you end up working again in retirement, you need to plan ahead to make sure your earnings stay within the income limits. If you are under your FRA, that limit is $22,320, and the Social Security Administration will deduct $1 from every $2 you earn above that. If you are reaching your FRA in 2024, the limit on your earnings for the months before FRA is $59,520, and it will deduct $1 from every $3 you earn. Social Security can be a complicated topic, but working with a financial adviser can help make it easier to understand.
The economy is always changing. Good times and bad times won’t last forever. It’s important to plan for both. The current state of our economy highlights the need for comprehensive financial planning. With the right plan in place, your finances can make it through an economic downturn or a job loss, and you will feel much more comfortable facing either one. A financial adviser can help you choose the right plan and the right path for your retirement.
Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.