Retirement is a milestone that is years in the making. Many older workers spend considerable time and energy determining when to leave the workforce for good. Unfortunately, some have the rug pulled out from under them and are laid off just as the end is in sight.
“Your instant reaction is to panic,” says Ruth Schau, now the director of retirement at Novant Health but whose role at her previous employer was eliminated as part of that company’s restructuring. As an older worker, she felt the unexpected layoff stole from her the opportunity to retire when and how she wanted.
Others might be feeling the same way as layoffs last month hit the highest level since July 2020, according to Challenger, Gray & Christmas. The global outplacement and executive coaching firm tracked 172,017 job cuts by U.S. employers in February 2025, led by a nearly 63,000-head reduction in the federal workforce.
Someone who worked in the fast-evolving tech field may find it more difficult to find new employment than a person who held a job, such as a managerial role, with more transferable skills.
Regardless of your work background, if you find yourself laid off within a few years of retirement, take these steps to get back on track.
— Pump the brakes on spending.
— Run the numbers.
— Consider your income options.
— Decide whether to be a job seeker or an early retiree.
— Reevaluate your Social Security strategy.
— Connect with your network.
— Rethink your interview strategy.
— Call in your friends.
— Savor some downtime.
Pump the Brakes on Spending
Now is not the time to make big purchases or spend frivolously. Instead, conserve your funds while the dust settles.
“I went into the mode of I can’t spend a dime,” Schau says.
You may not need to go to that extreme, but be mindful of your spending until you finish the next step.
[Related:When a Retirement Hardship Withdrawal Makes Sense]
Run the Numbers
Before you make any decisions, you need to know where you stand financially, both in terms of expenses and savings. You may also need to consider how you will get health insurance and how much that will cost.
With her background in actuarial science, Schau created spreadsheets to forecast her expected expenses and cash flow under different scenarios. However, you might need to find a professional to help.
“The first call should definitely be to a certified financial planner,” says Melissa Murphy Pavone, a CFP and founder of Mindful Financial Partners, a Long Island, New York-based firm that works with clients nationwide. “Make sure it’s someone with credentials.”
A qualified financial professional can review your savings and expenses to determine if and for how long you can go without earned income. They can also help identify your income options, which is the next step in this process.
Consider Your Income Options
Retirees at least 59 1/2 can tap into tax-advantaged retirement accounts such as 401(k) plans and IRAs. Those younger than 59 1/2 will incur a 10% tax penalty for most withdrawals from these accounts.
One exception is for workers who are at least 55 years old. They can take penalty-free withdrawals from a 401(k) held by the employer they just left. However, any withdrawals from 401(k) accounts held by other employers will be subject to a 10% penalty.
Another option for penalty-free withdrawals before age 59 1/2 is to make substantially equal periodic payments, also known as SEPP. People of any age can utilize this option, but once you begin receiving these payments, they can’t be easily changed or stopped.
“We don’t want to turn on any income that isn’t reversible,” Pavone says. She suggests first tapping into home equity, savings or even downsizing to bridge the gap in a budget after a later-in-life layoff.
[READ: How Much Are 401(k) Early Withdrawal Costs]
Decide Whether to Be a Job Seeker or an Early Retiree
Once you have looked at the numbers, you will better understand whether early retirement is feasible or more income is needed. Of course, even those who can afford to retire early may prefer to stay in the workforce.
“I really like what I do, and I wasn’t ready to leave my job,” Schau says.
If you decide to look for a new job, consider whether you need to continue working in the same capacity.
“Take stock of where you are in terms of your skills,” says Raymond Lee, president of Careerminds, a global virtual outplacement firm. He suggests people consider what would make them feel fulfilled. “That could be part time.” Lee notes that fractional jobs are becoming more common, allowing professionals with extensive expertise to do high-level work on a limited basis.
Others may find joy in less demanding part-time work. “People in that (pre-retiree to retiree) age bracket really like to turn their passions into part-time jobs,” according to Pavone. They may find employment at a golf clubhouse, sports shop or other store that caters to their interests.
Reevaluate Your Social Security Strategy
Most workers begin Social Security benefits anywhere from age 62 to age 70.
“I don’t suggest taking Social Security early because you’re giving yourself a permanent haircut,” Pavone says.
Starting benefits at 62 can result in a permanent 35% reduction in your monthly payment amount. Those born in 1960 or later need to wait until age 67 to reach their full retirement age, which is the age at which they can claim benefits without any reduction. Waiting longer to begin benefits will give retirees an 8% boost in their monthly payments for each year they wait past their full retirement age until age 70.
You may have already carefully considered when you plan to begin benefits. However, a layoff may require that you revisit those plans. In some situations, early retirees may find they have no choice but to begin Social Security early if they lack other sources of income.
[READ: 9 Jobs That Still Offer Traditional Pensions]
Connect With Your Network
If you have decided to look for a new job, reach out to your professional network to let them know. You may find employment leads from old colleagues, bosses and work acquaintances.
Networking can take the form of personal meetings and phone calls, but don’t overlook your online presence. Update your LinkedIn profile and personal website if you have one. And if you don’t have a professional presence online, now is the time to create one. At the very least, create a LinkedIn profile to serve as your online resume.
“If you’re 60 and have any uncertainty (about your job), take action today,” Lee says. Don’t wait for a layoff to start this step.
Rethink Your Interview Strategy
When you land a job interview, take care to appear up to date on the latest innovations in your field.
“The biggest challenge I see is that you’re not relevant,” Lee says.
By that, he means older workers may go into an interview and talk about how they remember the earlier days of an industry and how things used to be done. The message that an employer may hear is that you are stuck in the past.
“That’s where you get in trouble,” Lee says. “You have to scrap that and show you’re relevant. Talk about the present.”
“Whenever I interviewed for a job, I did a lot of homework,” Schau says. She searched Google and LinkedIn for the latest news about a potential employer. Her preparation paid off, and she was hired for her new job six months after her layoff.
Call In Your Friends
Schau says workers laid off later in life should take a tip from the Beatles and get by with a little help from their friends.
“No one should think alone on this. Talking to people was a savior for me,” she explains.
Friends can provide encouragement and commiseration, and some may have their own experiences to share. “I was amazed how many people reached out to me with similar stories,” Schau says.
Savor Some Downtime
A layoff just before retirement is stressful, but it may also present an opportunity to regroup and consider how you’d like to close your career. Ideally, you’ll have some savings or leave with a severance package that affords some financial breathing room.
Schau says some of the best advice she received was: “Just enjoy yourself for a few months.”
It may be easier said than done, but make a point of savoring the chance to step out of the rat race and reflect on what’s important to you.
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9 Steps to Take If You’re Laid Off Within 5 Years of Retirement originally appeared on usnews.com
Update 03/21/25: This story was published at an earlier date and has been updated with new information.
