Near Retirement and Recently Lost Your Job? Discover Ways to Safeguard Your Savings and Secure Your Financial Future

Facing a Layoff Before Retirement: How to Stay Financially Secure

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Losing your job just before retirement can be daunting, but with the right approach, you can still safeguard your financial future.

Main Points to Remember

• Although being laid off near retirement is stressful, you can still work toward a stable retirement.
• If you lose your job unexpectedly, pause to evaluate your finances and avoid making hasty choices.
• Try not to tap into your 401(k) or start Social Security early, as these decisions can have long-term financial drawbacks.
• Consider adjusting your retirement plans and explore part-time or consulting opportunities.

If you’ve recently been let go and retirement is approaching, it’s normal to feel anxious—especially if you hoped to save more before leaving the workforce. Even though a layoff can feel like a setback, you still have choices.

By making smart financial decisions, you can protect your savings, reduce anxiety, and create a pathway to retirement that supports your long-term goals.

First Steps After Losing Your Job

After a layoff, take a moment to process what’s happened. Avoid panicking or immediately withdrawing money from your retirement accounts.

“It’s important to address your emotions before diving into the numbers,” advises Crystal Cox, CFP and SVP at Wealthspire Advisors. “Your situation may look different, but you’ll get through it.”

Begin by reviewing your entire financial situation: How much do you have in savings? Which expenses can you reduce or eliminate? Are you receiving severance pay, and for how long? Can you apply for unemployment benefits? Are there other resources you can access?

Your aim should be to manage your cash flow so you don’t have to dip into your long-term savings right away. Taking on part-time or consulting work could help cover expenses, allowing you to postpone withdrawing retirement funds or starting Social Security. These strategies can make a significant difference over time.

How to Avoid Expensive Errors

It might be tempting to use your retirement savings when money is tight, but taking money out early from accounts like a 401(k) before age 59½ can result in taxes and penalties. Additionally, you’ll lose out on potential investment growth.

“Another frequent misstep is starting Social Security too soon, which isn’t always the best choice,” says Cox.

While you can begin collecting Social Security at 62, doing so reduces your monthly payments. If you wait until your full retirement age (67 for those born in 1960 or later), your benefit increases. Delaying even further, up to age 70, boosts your monthly payments by 8% for each year you wait.

What If You Claimed Social Security Too Early?

Cox recommends finding interim work to bridge the gap until you reach full retirement age. If you start Social Security early and regret it, you may be able to reverse your decision within the first year by repaying the benefits received.

Reevaluating Your Retirement Timeline

Being laid off as retirement nears may require you to rethink your plans. This doesn’t mean you can’t retire, but you might need to adjust your timing. Consider part-time work or semi-retirement.

Although it may not be your first choice, this approach can make your transition to retirement less stressful and more financially secure. Review your assets, Social Security benefits, and reduced expenses. Sometimes, postponing retirement by just a year or two can make a big difference in your comfort level.

Did You Know?

As of April 2025, 32% of job seekers had been unemployed for 27 weeks or longer.

Managing Underemployment

Accepting a lower-paying or part-time job might feel like a setback, but it still contributes to your financial stability.

The key is to stay focused on your financial goals. By cutting back on spending, adjusting your lifestyle, and consistently saving for retirement, you can still work toward your retirement dreams—it just might require a new approach.

If you previously relied on a workplace 401(k) and your new employer doesn’t offer one, you still have alternatives. Consider opening a Roth IRA if you qualify, or a traditional IRA otherwise.

“If you have extra cash to invest, IRAs are an excellent choice,” Cox notes. “Roth IRAs are especially beneficial if your income allows.”

If hiring a financial advisor isn’t in your budget, organizations like Advisers Give Back can connect you with free financial guidance.

Handling Healthcare and Benefits

Healthcare is often one of the most stressful aspects of losing a job. COBRA lets you keep your previous employer’s health plan, but you’ll likely pay both your share and your employer’s share of the premiums, plus a 2% fee.

Compare COBRA with plans available through the Health Insurance Marketplace. Many people qualify for subsidies that lower premium costs.

If you’re 65 or older, make sure you understand how and when to enroll in Medicare to avoid late penalties.

Final Thoughts

Being laid off as you approach retirement is challenging, but it doesn’t have to derail your plans. With thoughtful adjustments—such as reducing expenses, delaying withdrawals and Social Security, and taking on part-time work—you can still enjoy a secure and comfortable retirement.

Read the original article on Investopedia.