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Retirement can hit us with numerous curveballs. One of those could happen right out of the gate–when you experience a forced early retirement.
We all know that layoffs are part of the corporate landscape. While they are commonplace, when you are faced with one later in your career it can cause you to reevaluate your financial situation.
In this episode we discuss the options you should consider if you get laid off and how they fit in with your financial plan, your tax plan, and your investment plan.
Assess Your Severance Package
While getting laid off can be a blow to your psyche, it can provide you with options and opportunities that you may not have considered.
The first thing you should do is assess your severance package. Consider when and how you will get your package.
- Will it be spread out over time or given in a lump sum?
- Do you have options on how to receive your severance?
- How much flexibility will you have?
- Can you spread out the income over two years?
- How will the severance package affect your tax bracket?
Consider Your Health Insurance Options
You’ll also want to consider your health insurance options. Think about how long you have before you reach Medicare age. While you can get COBRA coverage for a short time, would it make more sense to explore spousal coverage or the healthcare marketplace?
How Does This Forced Early Retirement Affect Your Financial Plan?
Next, you’ll want to see where you stand in your financial plan and explore the options available to you. Reframe your employment mindset to explore the various options.
- Can you start retirement earlier? Or do you have to consider another similar W2 employment position at a similar salary?
- You might want to take a pay cut and enjoy a higher quality of life. Think about whether you’ll want temp or contract work.
- How does your cash on hand look along with your other sources of income?
- During your layoff year, will you be in a higher or lower tax bracket? This is a great time to explore multi-year tax planning options.
- Last but not least, assess your options for your 401K. Rolling it over is usually the right choice–but not always.
If you need help staying focused on your financial goals reach out to see how we can help you set up a financial plan that you can work with through life’s ups and downs.
Outline of This Episode
- [1:03] JP Morgan’s guide to retirement
- [1:45] Strategies to work through if you’re faced with a layoff
- [6:08] Where do you stand in your financial plan?
- [8:52] Look at your tax brackets
- [10:32] What should you do with your 401K?
Related: Transitioning to What's Next: Retirement Stepping Stones for Your 'What Ifs'