Forced to retire early? 6 ways to battle back

December 07, 2023

Allworth co-founder Scott Hanson shares six critical steps to take in the face of a late-career layoff or forced retirement.

As many as 50% of all people are forced to retire early.¹

Having such a monumental change thrust upon you can be one of the most difficult experiences a person can have.

Besides the shock, a forced retirement (or late-career layoff) typically occurs when you are at the highest earning and savings point of your career.

And the jolt of the transition can leave you with a near-total loss of personal agency and in financial peril as you may find yourself well short of having achieved your long-term savings goals.

While by no means comprehensive (speak to your fiduciary advisor if you lose your job or are forced to retire), here are 6 things you should do if you experience a late-career layoff or you are suddenly forced to retire early.

1. Hit the “pause” button

Yell. Curse. Go on the offensive. If you have been forced to retire, probably the last thing you want to do is relax.

Selling your home. Moving. Liquidating a retirement account. You probably feel that doing anything is better than nothing.

Not. So. Fast.

You are going to need to make some big and difficult decisions. Just do not make any big decisions … today.

If you’re able, and your forced retirement is not due to an all-consuming health emergency, then the first thing that you need to do is to collect your thoughts and your financial and professional bona fides.

Take a pause. Hold off temporarily on any major decisions. And if you are a client of Allworth (or if you aren’t a client, and need a free consultation), call your advisor.

2. List and assess your income sources and evaluate your overall financial situation

How much do you have in savings? Do you have an emergency fund? Will you be eligible for unemployment? Do you have debt? A mortgage? Are you legally eligible for Social Security? (Do NOT automatically apply).

Spend as much time as you need to list and assess your “Big Three:” Income, savings & Investments, and debt.

3. Cut obvious expenses and make a new budget

Okay, you’re probably feeling like you need to do something major right now.

So, if you are laid off or forced to retire, and you have the irresistible urge to do something this minute, here is an option: Immediately cut every truly unnecessary expense.

If you cancel a membership or subscription, you can always re-subscribe. Because while I recommended above that you pause and do nothing until you can assess your overall financial situation and talk to a professional advisor, there likely won’t be any downside to slashing every extra expense. (Plus, it will give you a semblance of control).

Next, make yourself a new budget. Remember: Money that is not going out is the same as money coming in.

You may not be looking forward to this part, but sitting down and figuring out how much must go out, versus how much you will have coming in, will impact the next big decisions you need to make.

**4. Ask yourself if you want to continue to work (Do you have to work? Can you work?)**

Some people are forced to retire and are ready. Others are forced to retire but are not emotionally or financial close to being ready.

If the forced retirement is health related (depending on what your capabilities are, and the type of work you do), or structural (your employer suddenly closed-up shop), you will have to evaluate what you are physically and professionally capable of.

Could be, that your work life is at an end. Could be, that this is only a small bump in the road.

When it comes to a forced retirement, or a late-career layoff, an entirely new professional path, part-time work, or another job are all possibilities for some people.

Meanwhile, accepting the severity of the situation and making the best of a life without work are the reality for others.

Identifying which camp you are in, and working from a perspective of informed reality, will enable you to make the best choices for your unique situation.

5. Take a look at your health insurance options

If you are 65 or older, you’re eligible for Medicare (although, contrary to widespread belief, it does not pay for everything). But if you have been forced to retire, or you have been laid off and are deciding if you can afford to retire, when it comes to health insurance, you’re going to need to do an assessment.

That is because the average 65-year-old couple will need more than $300,000 out of pocket to cover their healthcare expenses for 20 years.²

COBRA. Healthcare exchanges. Various independent insurers. Maybe continued coverage via your former employer. While healthcare is much too broad and complex to cogently break down here, your options for staying covered once/if your employer-sponsored insurance runs out (and this is as important a challenge as you will face) vary substantially depending on numerous factors, including where you live.

This is just one of the key areas where having a fiduciary advisor can have an enormous impact on the outcome.

The goal here is to never lose coverage, which can be financially ruinous.

6. Update your retirement plan

Unfortunately, if you suddenly get thrown into the blender of a forced retirement, you are probably going to have to update your plan. If you have saved exceptionally well, and you can no longer work, then even though everything may be moved up, you could still be fine.

But if you were just hitting your retirement savings stride, then every decision you make right now will have long-term repercussions and needs to be the best one for your unique situation.

Utilizing the information and answers you will have gathered from the above, as well as assessing what you personally want (and are ready for), will also help guide you.

And if you aren’t sure where to turn, but you have saved with intention?

It will help to have your financial situation and your overall retirement readiness assessed by a fiduciary advisor, who should be able to give you a detailed roadmap of your options moving forward.

¹^{Forced To Retire Early? What To Do Now | Investor's Business Daily (investors.com)}

²^{Retirement planning: Health care costs in retirement (usatoday.com)}

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¹Barron’s 2024 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking of independent advisory companies is based on assets managed by the firms, growth, technology spending, succession planning, and other metrics.

² Retention Rate Source: Allworth Internal Data, FY 2022

³ The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.

⁴ As of 7/1/2024, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $22.5 billion in total assets under management and administration.

⁵ InvestmentNews 2020 and 2021 Best Places to Work for Financial Advisers. The ranking reflects survey responses and scores completed by both employers and employees. Employers report their organization’s workplace policies, practices, and demographics. Employees complete a survey designed to measure the employee experience.

⁶ 2021 Value of an Advisor Study / Russel Investments

⁷ Ranked 9th Top Wealth Managers By Growth in Assets in the U.S. from RIA Channel, 2022. RIA Database and RIA Channel are registered trademarks owned by Labworks, LLC.

⁸USA Today Best Financial Advisory Firms 2024. The ranking is based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers.

⁹NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

^✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

^✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

^†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.