Allworth Co-CEO Scott Hanson helps you pick up the financial pieces if you experience an unexpected retirement.
The most difficult professional responsibility I have is when a client tells me they’ve been forced to retire.
Sometimes they’ve been diagnosed with an illness.
Other times, it’s because their spouse or a child needs full-time care, or because they’ve been downsized at work and see no route to a comparable position elsewhere.
Numerous studies confirm that as many as 50% of us will be forced to retire before we want to.[i]
That’s synonymous with: “before we’re financially or emotionally ready.”
Looking back at the dozens of times I’ve sat in front of people facing this crisis, as difficult as that conversation is for me, I know the stress caused by a forced retirement is of course 1,000 times harder for the client.
If the above describes you, there are things you can do to mitigate the hardships and get through it.
While by no means as comprehensive as a face-to-face sit down, if you’re facing a forced retirement (or late-career layoff), here are five things you can do.
If you’re the type of person that lets things ride, sitting back and waiting for others to take the initiative, you need to shelve that for now and get aggressive.
In short, you have one shot at this, so, if need be, put your “easy-going self” away.
From unused vacation time, to bonuses you’ve let slide, to promises made, to unreimbursed expenses, write down all the different possible monies that are coming to you, and then go get them.
Some companies are just disorganized, while others have a way of dragging their feet when it comes to paying for things like unused vacation or sick days.
Remember, that’s your money. The company just happens to be holding it.
Hopefully, you have an emergency fund to get you through the transition. Yet, even if you do, I hope you understand that, because you’re in a state of flux, and your income has suddenly stopped, this is the time to buckle down.
Look at your monthly expenses. What non-necessities can you cut or eliminate?
One thing you want to avoid is raiding your retirement accounts.
That’s because if you’re under 59½, in addition to ordinary income taxes, you’ll probably have to pay a 10% early withdrawal penalty (there are some exceptions).
I also want to warn you against immediately taking out a second or a reverse mortgage.
It’s just better to tighten your belt as much as possible, even downsize your home, instead of taking on more debt or tapping into your retirement savings accounts too soon.
Assuming you’re younger than 65 (which is the age Medicare kicks in), one of your top priorities needs to be healthcare coverage.
COBRA allows you to keep your current coverage for up to 18 months.
However, the cost of your monthly premiums will probably increase (perhaps a lot) because your employer is no longer chipping in, so it’s worthwhile to look into your other potential options.
Now, one thing that I’ve seen employers be very flexible about is the amount of healthcare they are willing to cover as part of a severance package.
So, when it comes to healthcare? Whatever they offer, ask for more. If the answer isn’t what you need, then ask again.
If you have a pension, you might have a decision to make: Do you take a lump sum or a monthly payout?
The choice you make will depend on several factors, including your health, age, other sources of income, and lifestyle, but here are some points to consider:
The above simply means that if you’re not confident in your ability to make these calculations, then you should get help from someone who knows what they are doing and who has your best interests in mind.
This is for folks who are healthy enough to keep working.
We currently have a good job market, and we have a culture where people change jobs a lot more than in the past. If you’ve been forced out, but want to keep working, even if you’re on the higher side of the working-age demographic, this is a good time to be looking.
But people over age 55 can still face biases and challenges.
Get every edge you can.
First, give your résumé a makeover. You don’t have to mention every job you’ve ever had. Instead, focus on the last 10 to 15 years.
If you’ve been employed at the same company for a while, you may not realize that the world of resumes has changed. They need to be electronically searchable for keywords and phrases.
If you’re going to be job hunting, spend the money to get a serious resume created by someone who understands that, even if you have more practical experience than the competition, your resume won’t be seen unless its length, content, and language get it noticed by the 'bots.'
Also, if it has been several decades, don’t post the dates you earned your degrees and designations. (Change your LinkedIn profile, as well.)
If you’re going to keep working—and you certainly can—what you need right now is to get interviews.
It’s an entirely new era, and the average age of the people who found the most start-ups in the United States is closer to age 60 than to age 30.[ii]
That’s a great thing for the world.
If you want (or need) to keep working, and you’re worried about your age, repeat these two things to yourself:
However, for those of you reading this who are facing a health (or other) crisis and can no longer work, I strongly encourage you to seek professional financial planning guidance to gain some unbiased perspective and to create a roadmap.
Whatever the circumstances around your current situation, with proper management and planning, you’ll not only get through this, you may very well be surprised by the options available to you.
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1The 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.
2Scott Hanson (2011, 2012, 2013, 2014, 2015 & 2016) and Pat McClain (2012, 2013, 2014, 2015 & 2016). Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
3As of 12/20, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $10 billion in total assets under management and administration.
4Barron’s 2020 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
✢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.