Personal Finance

I’m 57 and was laid off during the pandemic - I lost my good retirement benefits and now I don’t have enough for retirement

Rich Duprey

Published: November 29, 2024 7:05 am

The pandemic was a stark reminder of the fragility of even the most well-thought out retirement plans. Although we think we have a solid financial plan in place, life throws you a curve, often at the worst time. We think we are secure and — bam! — it all falls apart.

That thought popped into my head when reading the situation of one Redditor on the r/retirement subreddit who had been on track to $2 million in retirement savings when Covid struck and he was fired from his well-paying job.

Although he managed to find gainful employment again, he makes much less than he did before and can only contribute a quarter of the amount he previously did to his 401(k). He will be able to collect a pension from the prior position, but the Redditor believes he will be lucky to have $1 million in savings.

Despite believing his future is now one of joyless drudgery, he should see that having $1 million in savings can still allow for a rewarding retirement.

24/7 Wall St. Insights:

• Having a financial plan is critical for achieving our retirement goals, but be ready for calamity to strike.
• When circumstances dramatically worsen, focus on what is still achievable.
• Be proactive by having a backup plan ready to act on to improve your situation.

The Reality of a Shifting Landscape

Certainly the pandemic’s economic repercussions have been widespread. Many people now face previously unforeseen financial hurdles. The Redditor’s experience highlights the importance of acknowledging that even if you put a solid foundation in place, unexpected events can disrupt our long-term financial goals.

As boxer Mike Tyson once noted, “Everyone has a plan until you get punched in the face.”

That’s not to make light of the Redditor’s circumstances, and his situation may seem daunting to him, but it does underscore the importance of having a Plan B.  And there are steps the Redditor can take to improve his position. 

• Reassess goals. The original $2 million target may no longer be realistic so evaluating your needs and adjusting your expectations is essential. See what is possible with the $1 million you expect to have. For example, if vacationing in Europe was a goal, finding domestic destinations could be an option.
• Maximize current contributions. Increasing your 401(k) contributions to the maximum allowed, even if it means sacrificing some current spending, could significantly boost your retirement savings. The employer match is a valuable perk that should be fully utilized and might allow you to hit $1.5 million in savings instead of $1 million. 
• Explore other saving opportunities. Consider opening a Roth IRA, which allows for tax-free withdrawals in retirement, and provides another avenue for tax-advantaged savings.
• Put on your green eyeshades. A thorough and honest review of current spending habits can reveal areas where you can make cuts. Identifying unnecessary expenses and finding ways to reduce costs can free up more money for retirement savings.
• Diversify your investments. Having a diversified portfolio across different asset classes can minimize risk and potentially generate higher returns. 
• Explore part-time work. Taking on a part-time job, even for a few hours a week, can provide additional income streams to supplement retirement savings. This could also offer the opportunity to gain new skills and experience.
• Delay retirement. Instead of taking Social Security benefits at 65, maybe delaying retirement until 67 to get full benefits can provide additional time to accumulate savings. Or work until 73 when required minimum distributions (RMD) kick in. Working longer can also allow you to keep getting a paycheck and contributing to a 401(k).
• Seeking professional help. Now I’m not a financial planner, so these are just my opinions, but consulting with a financial advisor and tax professional can provide valuable insights and personalized strategies to navigate your situation. A professional can help create a comprehensive plan tailored to your specific needs and circumstances.

More than just numbers, a change in mindset 

While financial strategies are important, don’t just focus on any shortfall in your plan. The Redditor should shift his perspective to zero in on what he can control. Taking proactive steps to improve his financial situation can give him a new purpose.

However, the story serves as a powerful reminder that retirement planning is an ongoing process that requires flexibility and adaptability. Although unforeseen events can disrupt our plans, having a positive mindset and a backup plan in place can help us navigate whatever challenges life throws at us. It just might allow us to achieve our financial goals.