Critical Stuff: Losing your job is as traumatic as divorce or a loved one dying–even if you hated your job. Deal with the stress first. Bring your family and friends closer, do something that makes you feel good (without blowing money), take stock of your situation, then get busy to optimize the result.
In This Chapter: No plan, however clever, survives first contact with your idiot boss.
Booting out the cuckcoo. Simplify. Go on the dole.
So you got the boot, or perhaps took the early retirement offer with a bit of pressure (“these good terms might not be available later, Fred”). Now what?
I keep saying this, but it’s important–most people plan to retire at 67 or 68, but the average retirement age in the US is 62. I know, you’re not average, but most of those people retiring at or before 62 didn’t plan on doing that. If it happens to you, here’s some steps to take. In the long run you are going to slip into retirement mode, Most of these steps are shorter term, but they all help ease the ultimate progression.
If you are fit to do the job you previously held, or if your work is mostly about knowledge, then you may be able to find another position, work as a consultant, or start your own business. If you can’t find work in your profession a lower-paying job may be the best option. You shouldn’t consider tapping your Social Security early, even if it means starting to pull from your retirement savings. On average, each year you delay taking social security adds more than 8 percent to the amount you’ll be able to draw–over the entire time you draw Social Security. You probably don’t have many investments that deliver that kind of return. Unless you plan to die in very short order, maximizing your Social Security is important.
Here’s some immediate steps you can take as well as some longer term suggestions:
- Cut expenses. Tighten your overall budget immediately. If your job prospects don’t hinge on staying put, it may make sense to sell your home and move to a place with either better prospects or a much lower cost of living. You are likely to downsize once you are well and truly retired, it may be very wise to start early, especially if the housing market in your area is on the rise. The difference in the money you need to support yourself can be huge. I know people who have reduced their cost of living by more than 50 percent.
- Maintain your professional contacts and friends. You might think your career is over, but you could change your mind. And if you start consulting or decide to build your own business those contacts could be your most valuable asset.
- Trim your family support. If you got a “failure to launch” kid it might be time to light a fire. “We’re moving to a one bedroom condo in Nevada, Junior, time for you to find your way”. If you’re still supporting kids in college it might be time for them to secure their own loans. They can pay off their loan over their career–which is ahead of them. You’re going to have to live with what you’ve saved. Big difference. Think hard about this one. If your funds outlast you, then Junior can use his inheritance to pay off that loan. If they don’t, will he be willing to support you in your dotage? Will you want him to?
- Collect all the unemployment you can. Sure, there’s stigma. Suck it up. You paid for unemployment benefits all your working life. If you were laid off you are eligible immediately. Even if you took early retirement there may be direct benefits available if you are actively seeking another job. And be careful how you let your former boss characterize your leaving. If he pushed you out but gets you to call it retirement out of pride, then you don’t get full unemployment benefits. If you are a long time, well compensated employee and you think your employer might be showing you the door to cut costs, get out ahead of the issue and speak with a lawyer that specializes in employment issues. They can give you a map for getting the most out of leaving.
- If you must collect social security make sure you are going about it in the most advantageous way. If you are married there are some refinements. Research the best way. We’ll cover this lightly in the Social security chapter, but you might be well served to get expert advice or buy a book on social security. There are several good ones and lots of info on the internet. As always, Bogleheads is a great place to browse.
- Adjust your expectations. Someone offering you a job at 50% of your previous pay is not insulting you, they’re offering you a job.
- Get fit. Exercise and sport will boost your energy, beat depression, boost your confidence, and make you healthier. Read the diet and exercise chapters and get going.
- Revamp your health insurance. COBRA lets you stay on your employer’s policy for 18 months, but you have to pay the full cost. You may be able to do a lot better using the Affordable Care Act. You need to know your options. An hour of a specialist’s time can be an inexpensive investment.
- Revamp your finances. This might be a great time to convert your IRA to some flavor of Roth IRA if your income is going to be low.
- Do stuff. Hobbies, sports, travel, education. Dig into the chapters on these things for ideas, and get going. If you sit around waiting for things to happen you’ll stagnate. Start making this the most interesting and fulfilling time of your life–even if you take on other work.
- Embrace the change. You can live a fulfilling life with less stuff. Recognize that everything you own, owns you. Simplifying means less maintenance, less cost, less distraction from the things that really matter to you. I could have a happy life with my wife, a van and a surfboard. Nice that I don’t have to, but great to know I could.
Homework Assignment: Even your career is on solid ground and there is no prospect of getting the boot, view this chapter as an opportunity to explore how you can change your life and your retirement prospects for the better. Take a look at your current expenses, the stuff you have, and take a practice run at reducing your expenses substantially. If you have a vacation home, and RV, a boat that you rarely use, anything with low utilization, consider the effects of selling them and renting something similar if you really need or want it. Even if you don’t pull the trigger, it’s a useful exercise to examine the effects of simplifying and budgeting. The proceeds from simplification can be put to work to build your nest egg. A friend of mine sold the beach house he rarely used and couldn’t rent because of local regulations and bought a rental property with a 1031 tax-free exchange. The rental income will provide a substantial part of his retirement needs. He converted an expensive, non-performing asset into an equally valuable asset that generates income.
Followup: Did you start gathering information on your assets and retirement investments. You’re going to need them. We’re going to work on how much money you need to support retirement soon. And you need to know what you have to make the later chapters valuable and actionable.