We all tend to think that retirement won’t come until we’re in our sixties or even seventies. We think we have plenty of time to save and prepare for that next phase of our lives. But what happens if it comes sooner than you think? In some industries/occupations, it’s not uncommon for people to be subtly pushed out of the workforce in their fifties (or even younger).
Younger workers or contract workers cost less so some employers encourage older workers to take early retirement, or simply lay everyone off and replace them with younger or contract workers. If you’re laid off from a job and you’re in your fifties, it can be difficult to find a new job because employers know you want/need more money than a younger person. Even if you’re willing to take the lower salary, you may still not get hired because the employer assumes that you are older and therefore set in your ways and difficult to train. Either that or they assume that your skills are out of date. Whatever the reason, you may find it very difficult to get or keep a job until you’re ready to fully retire.
All of these are subtle forms of age discrimination that are impossible to prove or fight against, but which may result in you having to retire earlier than expected. Employers aren’t refusing to hire you because of your age, specifically (which would be illegal), but because they want to save money and bring in younger workers that they can mold and who have more current skills. These are all legal reasons to refuse to hire an older worker because none of them can be proven to be related directly to age. Are they ethical? You can debate that forever. But they are legal. So what do you do? Here are some strategies.
While you’re still young, employed, and earning money, you have to keep in mind that retirement may come earlier than you want (and through no fault of your own) and prepare accordingly. The first thing to do is to not wait to start saving. Too many people wait until their kids are grown and gone before they start seriously saving for retirement. Unfortunately, that is about the time that you may find yourself pushed out of the workforce. You need to save as much as you can as early as you can and keep adding to it.
Carefully Allocate Your Savings
You also need to save in vehicles that you can touch in your fifties. You can’t withdraw from many retirement accounts until you’re fifty-nine and a-half without paying heavy penalties (unless you meet some very specific conditions). If all of your money is tied up in these restricted accounts and you need the money, you could be in trouble. Make sure you keep some money in regular investment or savings accounts that you can access at any time.
Have Multiple Income Sources
If you’re forced out of your primary job, make sure you have some other sources of money. Maybe have a hobby that can earn you some money. Make sure some of your investments pay dividends and enough interest to amount to a significant sum. Take on some freelance work or temp work. The more streams of money you have coming in, the less the loss of the primary job will hurt.
Have A Plan
Many people create a plan for retirement (play golf, travel, etc.) but that plan usually assumes that you reached full retirement age. If retirement comes before you’re ready, what will you do? Will you look for work? Will you work part-time? Where will the money come from? How much will you need? Where will your insurance come from? Will you have to downsize? Ask yourself all the “what if” questions and know the answers. Hopefully you won’t have to invoke the plan, but it’s better to have it.
You want the kind of work that you can do on your own. You want to be able to freelance or open your own business. This way, if you’re forced out you can go out on your own and keep bringing in money. If you have a job/skill set that requires you to work for someone else, start making the transition before you have to. Learn new skills, go to school if needed, and figure out what you need to do to go out on your own. That way you won’t be scrambling to find something you can do if you’re forced out of your primary job.
No one wants to think that retirement will come before they’re ready, but in todays’ corporate world early/involuntary retirement is a way of life. You really need to have two retirement plans. One that assumes you reach your sixties or seventies, and one that assumes you only make it into your fifties before you have to leave the corporate world. It isn’t safe to wait to save until you’re in your forties or fifties because you could end up with nothing. So plan as if retirement will come earlier than you want, but hope that it doesn’t. Do it right and you may find yourself able to voluntarily retire early, if you want to.
(Photo courtesy of Dan4th)