The job losses suffered over the last two years have been devastating across every demographic but one of the groups put in the most precarious positions when losing a job are people within five to ten years of retirement. Workers in their 50’s and early 60’s who are laid off or pushed into an early retirement face risks that are not encountered by younger employees. As companies decide to eliminate jobs and consider which employees are most expendable, senior workers are often a logical choice since they are likely within a few years of retirement and since they are usually among the most highly compensated employees.
The job market is bleak for everyone, but workers in the later stages of their careers are at risk because the companies that are hiring are more likely to seek younger employees that cost less to hire and that have more potential to be long term assets to the company. Some laid off workers consider simply retiring a few years early, but most are not in a financial position to fund an extended retirement. Longevity risk is one of the most serious risks facing retirees and the thought of running out of money late in life is something no one wants to think about.
For people within five to ten years of their anticipated retirement date, here are some tips to reduce the chances of running out of money.
- Work Longer: This is an obvious choice if you’re able to find a job because the longer you can collect a paycheck, the longer you can delay collecting Social Security or tapping into your retirement savings. There are several websites that focus on employment opportunities for people over the age of 50. The last few working years should be spent making wise financial decisions and padding your nest egg as much as possible.
- Delay 401K Withdrawals: Sometimes people don’t have much of a choice about tapping into their retirement accounts, but this is something that should be delayed as much as possible for a few important reasons. First, if you withdraw funds before the age of 59 and a half, you’ll throw away 10% of the amount you withdraw in the form of an IRS penalty. In addition, you’ll pay income tax on every cent that you withdraw unless it comes from a Roth account or post-tax contributions. Finally, the more time you can give your money to grow, the better your chances are of being able to make ends meet during your retirement.
- Consider An Annuity: One of the investment vehicles designed to provide income during your retirement that you can’t outlive is an annuity. There are several benefits to investing in annuities, but the biggest is that at a certain point in life, you can turn on an income stream that is guaranteed by an insurance company to last as long as you do. There are a lot of moving parts and options for people investing in annuities and it’s important that you do your homework before investing, but an annuity is one of the few financial tools that can act like a pension and provide a paycheck every month for the rest of your life, however long it might be.
