Keep up the career hustle — or retire early and enjoy your time?
The last 10 years of your career should be its peak; it's when you've found the niche in your work that suits you best, and you're earning the most you've ever made. It should be the best 10 years of your working life.
But what happens if it goes wrong and you find yourself between jobs? Corporate restructuring, outsourcing, and a number of factors, including a recession, have made this more common. To make matters worse, ageism can limit your options for finding a new position. There comes a point where the question isn't what job you should get next but whether you should retire early.
We can't answer that question for you. The right course of action will vary from person to person and situation to situation. We can, however, pose 10 important questions you should ask yourself while making this life-altering choice.
What to do when you're jobless after 60
1. What is your financial picture right now?
Answering this question gives you a clear map of your financial situation so you can plan your route.
What would it look like if you retired today? Do you have enough savings, investments, or passive income to live a reasonably comfortable life? If you're set for life, this gap in employment may be a blessing in disguise. If that's not the case, you need to take a close look at what you need to do, including:
How close your retirement savings are to your retirement target
How much of your savings would be subject to early withdrawal penalties and what those penalties would be
What sources of income — long-term and one-time — you can expect in the next few years
Put all of those pieces together and compare them to what you think your annual expenses are likely to be. You'll come out with a clear picture of your situation that can help you determine where to go from here.
2. How long will unemployment compensation and other income last?
By answering this question, you can establish a timeline for your plan of action and provide a deadline for having your next step in place.
If eligible, you should receive unemployment compensation for 13 to 30 weeks, depending on your state. Add to that calculation severance pay, pension, or other payments you can expect in the early months of your unemployment. If your spouse earns a salary, include that in your calculations as well, while Social Security may also be a factor here, as well.
If the timing is exactly right, this income could last you until you reach your retirement goals — or at least the age when you suffer fewer penalties for accessing your retirement savings. If not, you can use these funds to stretch out the time you have before you put your new job plan into action.
3. How will you manage health insurance?
Answering this question sets the parameters for one of the biggest costs in your pre-retirement years; it can make or break your chances of success.
Employer-provided health insurance is especially important as we get older and suffer more health problems. It's one of the most common reasons people retire after they are otherwise financially ready to do so. If a break in coverage comes before you're eligible for Medicare, it will be a major factor in your planning.
If you're fortunate enough to get your medical coverage from another source, such as veteran's benefits, union or trade association membership, or through an employed spouse, you can skip this part and count your blessings. If not, investigate COBRA options and opportunities through the Affordable Care Act insurance marketplace.
4. How can you trim your budget?
Asking yourself this question will help you set the baseline expense rate for your life moving forward. With that in mind, you can make informed decisions about how much money you earn and whether you should slash your expenses.
Most of us have an inflated budget during our working life. That's because we're accustomed to the income and the added costs we incur from working, like:
Daily commuting costs like gas, public transportation, and parking
Eating lunches out while at work
After-work drinks with clients and co-workers
Fees to maintain certifications, memberships, and licenses
An additional car
Beyond these direct costs, most working families' budgets suffer from bloat because their jobs take up so much time. As a result, they lack the extra hours to watch their spending carefully, to cook meals instead of dining out, or to mow their own lawn.
If you look to these areas first, you can often trim your living expenses substantially without giving up anything that's truly important to your happiness. You may find your financial needs for the near future are lower than you believed.
5. Can you consult?
Answering this question helps you identify the feasibility of one potential source of income to bridge the gap between now and retirement (or another full-time job).
At this stage in your career, you've likely created a degree of understanding, skills, tips, tricks, best practices, and general knowledge about your trade that's worth something on the open market. Companies that wouldn't hire you full-time for any number of reasons might pay you to come in for a week and help them solve problems, and your contact network from your career can form the basis of your potential client list to help you launch this phase of your career.
Consulting has the potential to equal or exceed your full-time employment income if you manage your consulting business well. More importantly, it comes with a degree of flexibility that can mean you earn sufficient income while enjoying much of the freedom full retirement has to offer.
6. Can you monetize a hobby?
Could you earn extra income doing something you love?
Everybody has a hobby, and every hobby has an industry that supports it. If you love model trains, could you flip them on eBay by buying large lots and selling the best pieces? If you're a music fan, could you start writing reviews for websites and local papers? If you're a dog lover, could you become a dog walker or pet sitter?
Monetizing a hobby can be risky, as the temptation to spend more than you earn is powerful when you're surrounded by a pastime you love. But if you can find a simple, reliable way to turn your passion and knowledge into money, it can become a consistent income stream.
7. Can you take a side gig?
Answering this question helps you decide if you should take a side job of sorts that may not pay as much but could give you extra income.
It's possible you won't be able to find a job at your accustomed rate of prestige, benefits, and pay. Some job markets are extremely competitive, while others suffer from rampant age discrimination. That doesn't mean you're out of options, however.
There's nothing wrong with taking a low-stress gig that pays the bills but demands less of your time, attention, and energy than you gave to your regular career. You might find driving a school bus, tutoring college students, loading packages, or driving a truck provides an income you can live on while letting you shift the focus of your life to more personal endeavors.
8. How quickly can you eliminate debt?
By answering this question, you can make a meaningful difference in your monthly expenses and set yourself up for long-term financial success despite this temporary setback.
Payments on debt (not including mortgage payments) represent between nine percent and 10 percent of the average household's disposable income. They may take up more or less of your monthly budget, but however much you pay, eliminating them can make a substantive difference in your required expenses moving forward.
Create an aggressive plan for paying off any outstanding balances and adjust your career planning to match. If you're jobless because of a layoff, you may want to consider using any lump-sum severance to manage the payoffs.
9. Where do you want to live?
Answering this question can help you zero in on your retirement expense needs and potentially tap a source of liquid cash to help you. This question has two parts: Where do you want to live, geographically speaking, and what kind of lodging do you want to reside in?
Geographically speaking, is your long-term plan to continue living where you are? Or do you want to move closer to your children or friends? Are you open to moving somewhere with lower housing prices and a lower cost of living (including even expatriate living)?
If that's what you have planned for retirement, perhaps you make that decision now. You could liquidate equity or reduce your rent payments in a way that opens up more options.
As for what kind of lodging you prefer, the question focuses on whether or not you can downsize your housing. Many people at this age still live in the home that was big enough to raise their children in. Though it's convenient during the holidays, it may be time to let the kids take over and move yourselves into a place that's more affordable and easier to maintain. More than one person has bridged the years to retirement using an equity payout from such a move.
10. What do you do on purpose?
Careers tend to reduce our lives to a series of habits and paths. We make a lot of decisions just because they fit the trajectory of our careers and lives, without really considering how important they are to our happiness.
Although stressful, becoming jobless later in life has the advantage of letting us look at our decisions with a clearer focus. How many of your decisions, habits, costs, and priorities truly improve your life and make you happy? How many of them are just things you do automatically or simply because they fit with the demands of your career?
Answering this question provides both short-term and long-term benefits. Right now, it can help you slash expenses from your monthly budget by identifying costs that no longer benefit you. And the benefit of thinking deeply about what brings you happiness and what doesn't will help you steer the next phase of your life in the right direction.
Although being without work in your later working years can be extremely stressful, it can help to look at your situation as an opportunity. With some work and deep consideration, you may be able to shift the focus of your life from a job you like well enough to one where you pursue the things that truly bring you joy. Maybe those things will bring in some money. Maybe you'll find you can live on what you have and make other use of your time.
The important thing is to remember that without an employer, the choice is all yours. You get to decide what this next act of your life will be like. Hopefully, these questions can help you with that decision.
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Why You Should Speak to a Financial Advisor Before Changing Jobs