According to a 2023 study, 56% of retirees don’t get to choose their moment to retire. Sometimes, an unexpected late-career layoff can force retirement upon you without any announcements, parties, or time to prepare. One day you were employed and the next you’re retired. As mentioned in Retired or Not, retirement is a state of mind, so perhaps what you actually are after a late-career layoff is unemployed, with a small (but non-zero!) chance of finding desirable new employment. With luck, you are in a financial position where retirement is at least an option for you going forward. If not, I really don’t envy you.
This post outlines 10 tasks to tackle during the first few months of the unemployment/retirement purgatory that follows a late-career layoff. Some of these tasks are time-sensitive, so treat them as your job for a few months.
A good initial goal is to get to a ’new normal’ state - a new steady state that now doesn’t include a traditional job. While you won’t get everything completely worked out immediately, aim for a livable state that avoids worst-case scenarios, then tweak and optimize later. Of course, if you find a job, just go back to your working routine again.
The List
Everybody’s situation is unique, so some or all of these items may not apply. In no particular order:
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Obtain health insurance coverage
This is perhaps the most unpleasant thing on the list, but unfortunately also the most pressing, as job-sponsored insurance coverage can end within a few weeks. If you are 65 or older, get on Medicare. If not, the realistic options are COBRA or finding a plan on healthcare.gov (“The Marketplace”). For me, healthcare.gov was much more affordable than COBRA coverage. A snag with healthcare.gov is that how much coverage costs depends on your expected income. It will ask you for numbers, which means that you have to at least get a start on the next item before you can get coverage.
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Estimate your future income and expenses
This is essential for practical reasons, and to help reduce financial anxiety. Make a list of recurring expenses including monthly bills and also big-ticket items like insurance, property taxes, and quarterly tax payments.
After you know your expenses, figure out where the money will come from; it may be social security, steady income, or tapping into retirement accounts. Remember, money withdrawn from 401k accounts counts as income for healthcare.gov and taxes.
Estimating your first-year income can be tricky, as you may have some income from your previous job and some from other sources. So consider both the first year and steady-state retirement in subsequent years. While there is some urgency to getting reasonable first year numbers quickly for insurance and tax purposes, you can refine and rethink your retirement income and expenses for subsequent years later. Online resources and financial advisers can help with long-term retirement strategies.
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Deal with employment/unemployment
If you haven’t completely closed the door on getting another job, update your resume and make notes about your recent accomplishments on the job while it is all fresh in your mind. Reconnect with your network of friends and coworkers for possible job leads. Get caught up on new developments in your field, or explore related fields where your skills still apply .
If applicable, consider filing for unemployment. Getting the steady unemployment income is nice while the unemployment benefits last, but it comes with a downside in that you have to perform and document job search activities, which can become a fairly depressing chore.
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Deal with Social Security
When to start taking Social Security benefits is a complex decision. Many websites and professional advisors can help. I wrote an app to help me think through a particular Social Security benefits strategy that applied to my situation. Writing this app took on a life of its own, so I made a post Coding for (Social) Security about it. Note that claiming Social Security benefits is a step that is harder to walk back compared to other items on this list. So my general advice is not to immediately claim Social Security benefits unless you absolutely need the money to live. Think about it for a few months and work Social Security into your intermediate/long-term plans.
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Get your financial house in order
For me, working full time and having a steady income gave me the excuse to put off dealing with certain financial chores. Retirement changes your financial landscape, so consolidate your finances. Roll over company 401k(s) to an IRA account that is not affiliated with your previous employer(s). Check security and beneficiary settings for all accounts. Freeze your credit. Set up recurring expenses to autopay from a credit card for convenience and cash-back benefits. Start learning about retirement tax strategies, even though you will likely not be able to implement those strategies for your first year.
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Get your physical house in order
This is a good time to take on some of those smaller projects around the house that you’ve put off. Maybe replace those fogged windows, or upgrade your home wifi. Adapt your environment to your new situation, but avoid major renovations initially. Declutter by selling or donating some unused things around the house.
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Get your physical health in order
You know all that exercise equipment and/or the gym membership that you never had time to use while you were working? Well, you’ve got time now, no more excuses. When you get fed up with some of the less pleasant tasks on this list, taking breaks for physical activity can improve your mental state. Try switching to decaf coffee or skipping that after-work happy hour martini - you may find that you no longer want the same levels of chemical stimulation or de-stimulation as when you were working.
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Get your mental health in order
Don’t neglect your mental and emotional health. The first few months of retirement/unemployment purgatory can be stressful, so take breaks and spend quality time with loved ones. Treat yourself to some future-directed purchases. Arrange for a family vacation or getaway as a reward for getting through the transition.
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Hobbies
Most people count on their hobbies to play a bigger role during retirement. By all means pursue your hobbies during your initial weeks/months, but be aware that distractions caused by retirement ‘startup transients’ might interfere with your enjoyment initially. Do some prep work for increased enjoyment of your hobbies in the future, perhaps by ordering new equipment or furniture and re-arranging rooms.
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No major decisions
Finally, avoid making major life decisions for a while. Let things settle before making significant changes like moving, buying that beach condo, or making major renovations to your home.
Summary
By addressing these items, you can pave the way for a more relaxed and enjoyable retirement. And if you find a new job, the work done on most of these tasks will not have hurt you. In fact it may be time well spent to help you prepare for a non-surprise retirement in the future.
