I may be forced to retire before being ready - help me prepare for it!

[Blanche]

FIRE was not on our horizon at all. Unfortunately, I now hear loud and warning rumbles of a looming and massive restructuring at my employer, come mid/end of 2026, well before I am ready for it. I intended to work until FRA, mainly because I actually enjoy what I do. So, could do with some advice.

What steps should I take take to ensure adequate cash flow in "retirement", in the 12-18 months I will have income? 12 years away from FRA if/when I get laid off next year.

Will have 19 months' worth of expenses in a savings account, if/when I am let go. The other money is ALL tied up in our retirement accounts (yes, foolish of us).

Will be trying to get another job, but the field is being automated at a rapid pace, so may not be successful in finding another position. Open to getting into a new field but my age may be an active (unspoken) barrier.

I would ideally have liked to work until 65 but that may simply not be possible now. What should I be doing now as we get ready for this potential disruption to our life? No debt aside from mortgage. Kids are grown and don't need any support. Have plans to buy a new, reliable car (necessary, current car is 15 years old and has a lot of mileage on it) when I still have income to pay cash for it. Thanks.

 

[Koolau]

You can start here:

Early Retirement FAQs

Links and FAQs to discussions covering the most common topics for early retirement and financial independence.

www.early-retirement.org

I'd start a complete inventory on your assets/debts and then run FIRECalc to see if you can retire.

FIRECalc: A different kind of retirement calculator

www.firecalc.com

 

[pacergal]

I am sorry this is happening before you planned.
Answer the questions "some important questions to answer before asking can I retire?" in the
FAQs referenced above.
And run firecalc.

I would stop $ going to retirement accounts and keep it a bit more available. I know you mentioned you have cash for 19 months of expenses, but not knowing if another job will come your way, I, personally, would want to have a good cushion.

Best of luck to you.
There are lots of knowledgeable folks here, so ask questions along the way.

 

[sengsational]

If you don't do it already, keep track of expenditures, and be able to total the must have vs nice to have. Also be able to separate work related expenses (commuting, income tax, clothes, workday lunch, etc). You might find your burn rate is lower than think.

Also, you can always take out the money used to fund your Roth without any tax consequences (not the gains, but the original basis). Best to let the Roth funds compound, but if you need those funds, they are available.

Also, if you get laid off in the year you turn 55 or older, you might have access to your 401k without penalty. Just call HR and ask. Or you can read the plan description...it should say. It is a common, but not universal feature.

Even if you have access to COBRA, as long as you don't engage it, you are free to buy an ACA policy and get a subsidy. Don't reject COBRA...you have 60 days to pay, and if you need it, engage it. But unless you are very unlucky, you won't need it and you'll have time for your ACA policy to kick in. All of this presumes you aren't covered under a spouse policy. You can go on healthcare.gov and price-out a subsidized policy right now. Allocate a couple of hours, take your time, and come back if you have questions.

Forget the new car if the old one will get you from place to place in a moderately reliable manner. If it breaks down, you have Uber. And being employed vs unemployed means nothing when buying a car for cash. Wait until you have to before throwing money into a depreciating asset.

 

[OldShooter]

The other money is ALL tied up in our retirement accounts (yes, foolish of us).

"Tied up?" How so? There is nothing wrong with this if the retirement program is well funded and/or if your savings are your property. One risk is if you have saved by investing in company stock. If that's the case, sell the company stock and reinvest in broad index funds. You do not want to be a victim if the company stock tanks. Talk in detail with your HR department about how your company plan works. This isn't tipping your hand; it's simply the natural thing for someone approaching requirement. If necessary, understand the PBGC's rules in detail. (You probably do not want to go there unless it's necessary.)

 

[Blanche]

Thank you all so much! Really appreciate the feedback.

Where can I learn more about this rule of 55? 65% of my 401K is a ROTH 401K, so I am assuming no taxes either?

Another question - pension. I am afraid to ask HR, just in case that sticks a neon "lay me off" tag on my forehead. Employee handbook says pensions vest after completing 7 years of service (which I have). But still worried if I would lose my pension if I got laid off next year (as opposed to quitting voluntarily)? I can draw early (at 55) but would permanently reduce my benefit (there's no COLA).

My goal is to push forward until we turn 60 and we can both touch our ROTH IRAs. How can I find out about my pension and 401K availability if laid-off, without putting any "ideas" in my employer's head? Thanks.

 

[Blanche]

"Tied up?" How so? There is nothing wrong with this if the retirement program is well funded and/or if your savings are your property. One risk is if you have saved by investing in company stock. If that's the case, sell the company stock and reinvest in broad index funds. You do not want to be a victim if the company stock tanks. Talk in detail with your HR department about how your company plan works. This isn't tipping your hand; it's simply the natural thing for someone approaching requirement. If necessary, understand the PBGC's rules in detail. (You probably do not want to go there unless it's necessary.)

Sorry, what is PBGC? By "tied up", I mean we over-funded our IRAs to the point we don't have any liquidity and most of our savings is in those IRAs. We emptied our liquid life savings into buying our home recently (another mistake). While it made the mortgage very affordable it also means we are now having to work extra hard to horde cash. Haven't funded our IRAs this year, and cut off 401K contributions.

Really stressful.

 

[Trailwalker]

Take a deep breath. Lots of people in your situation. Lots of people on the forum have been in your situation. How do you eat an elephant? One bite at a time.

 

[CRLLS]

Since you have used the "we" word, I assume that you have a spouse. If not already working, it might be good if they can pick up a j*b to help your financial situation, at least until you get comfortable with the retirement plan. You also could think about what you will do for income if in fact the SHTF.

Like others have said, this is not the time to think about buying a new car when you are uncertain about the future situation. Firecalc is a great tool to make a big picture plan as is Fidelity's retirement tool. You don't need to be a customer at Fidelity to use it. I found Fidelity great to help us itemize our expenses. Once you have a good handle on expenses, use both to work a plan.

I was in your shoes at age 55. I was part of a right-sizing effort. That was 18 years ago. We made it. DW went back to work for a few years because she thought "we" needed to. I picked up a PT consulting gig after a few years too. While not absolutely necessarily needed, they both helped us sleep at night.

 

[PlayinwithFIRE]

That's a long time frame to cover. To end up with a big boost in taxable, you may need to consider
things like selling a home+relocating/downsizing, part time work and lastly taking the penalty on some of the
tax deferred before 59.5 iif necessary .

good luck !

 

[Diogenes]

Normally we regard retirement as threshold of liberation and buoyant escape from so many stifling decades of pretense and prevarication.... but it must be on one's own terms. Even if amply ready financially, we may not be ready emotionally. Finances can be repaired or otherwise amended; emotions are a far harder matter. So, even if by some recipe we get the finances right, we haven't quite gotten the whole picture right, if emotionally we remain wounded and distraught.

I have no remedy... other than to just acknowledge the problem. You are not alone, OP!

 

[audreyh1]

If there are massive layoffs perhaps there will be some severance package?

You’ve stopped funding tax deferred accounts so you can hoard cash now.

59.5 is the age you can start drawing from IRAs without penalty.

 

[Koolau]

PBGC = Pension Benefit Guarantee Corp

About PBGC | Pension Benefit Guaranty Corporation

Welcome to PBGC! Since 1974, we’ve protected retirement security and the retirement incomes of about 31 million American workers, retirees, and their families in private sector defined benefit pension plans.

www.pbgc.gov

They are in "insurance" company a bit like FDIC but for company pensions that get into trouble.

By the way, you can get a report about the "health" of your pension from your company. Your company should have a report on how much of your pension plan (company wide) is "funded."

 

[Koolau]

Oh, I forgot to mention that you are not the only one who "over funded" their IRAs/401(k)s. I did that as well and have struggled for 20 years to keep enough cash handy without paying too much in taxes. But, you have some Roth money you should be able to take out if you absolutely must. Also, with your high level of equity in the house, you could, if absolutely necessary, take out an equity loan to tide you over.

I agree with not funding your savings plans to hoard cash just before retirement.

Best luck and keep us posted on what you find out and how your plans are shaping up.

 

[sengsational]

Thank you all so much! Really appreciate the feedback.

Where can I learn more about this rule of 55? 65% of my 401K is a ROTH 401K, so I am assuming no taxes either?

Not "no taxes", just "no penalties." But if you sip from your 401k, your tax rate should be low. Especially true if you concurrently sip from your Roth, or "no taxes" if you pull exclusively Roth funds.

You might have a "defined benefit pension" along with your 401K, but accessing funds in the 401K would be independent of that.

They are required by law to send you the specifics of your 401K at least annually. Look for a multi page set of "fine print" or a equivalent PDF. The one my company sends has the age 55 rule in it. You might be giving HR too much credit, but I get not wanting to tip your hand.

 

[latexman]

I am afraid to ask HR, just in case that sticks a neon "lay me off" tag on my forehead.

IMHO, the evil HR stigma is not usually deserved. That’s my personal experience after 45 years in three MegaCorp’s. I was actually in 1 MC for 22 years, bought by MC # 2 for 9 years, and our business unit sold to MC # 3 for 14 years. I’ve dealt with many HR types though good times and bad.

Preface any request to HR with your plan, “I’m going to retire at about age 67, can you . . . “

 

[mystang52]

Another question - pension. I am afraid to ask HR, just in case that sticks a neon "lay me off" tag on my forehead. Employee handbook says pensions vest after completing 7 years of service (which I have). But still worried if I would lose my pension if I got laid off next year (as opposed to quitting voluntarily)? I can draw early (at 55) but would permanently reduce my benefit (there's no COLA).

Once you're vested, you're entitled to the pension regardless of why you left employment. Of course the pension's rules still apply, such as earliest age you can first collect payment, and how that pension payment is calculated.

 

[pb4uski]

Take a deep breath. Lots of people in your situation. Lots of people on the forum have been in your situation. How do you eat an elephant? One bite at a time.

+1. Calm down. Let's assume for a moment the worst case and that in 12-18 months your working days are over.

First question is whether you have enough. You can use FIRECalc to give you insight on that. You input your portfolio, social security, your pension, etc and use the investigate tab to solve for how much you can safely spend each year and compare that result to what you expect to spend in retirement.

It looks like you may qualify to make penalty free withdrawals from your 401k if you can qualify for the rule of 55. If not, you can use a 72t or SEPP to withdraw from your 401k penalty free. Some 401ks don't allow flexibility in withdrawals and you can sidestep that by rolling your 401k over into a traditional IRA and then setting up a 72t/SEPP.

Many employers have systems that employees can log into to see what their benefits are and your pension might be there. If not, you can always tell HR that you are doing some financial planning and your financial planner needs to know what your pension benefits are.

As others have mentioned, an important thing to do is to analyze your spending over the last year or two to get a solid view on how much you need to live.

Keep the questions coming. We're here to help.

 

[engineernerd]

What should I be doing now as we get ready for this potential disruption to our life?

I am not familiar with the home-lending world anymore, but if it wouldn't cost too much you could consider taking out a HELOC on your home while your income still qualifies you. Could be a good hedge against lumpy unexpected expenses.

 

[Koolau]

IMHO, the evil HR stigma is not usually deserved. That’s my personal experience after 45 years in three MegaCorp’s. I was actually in 1 MC for 22 years, bought by MC # 2 for 9 years, and our business unit sold to MC # 3 for 14 years. I’ve dealt with many HR types though good times and bad.

Preface any request to HR with your plan, “I’m going to retire at about age 67, can you . . . “

Probably correct (in general) about HR, though remember who pays them and (therefore) who they actually w*rk for (not the empl*yees). YMMV

 

[sengsational]

I am not familiar with the home-lending world anymore, but if it wouldn't cost too much you could consider taking out a HELOC on your home while your income still qualifies you. Could be a good hedge against lumpy unexpected expenses.

That is a good "do now" thing. I also am not current on HELOCs, but I think that they're not at all expensive if you don't take out funds. You DO want to make sure you properly close it out when you are done with it, so you have clear title (get the paperwork from the county showing it's paid off).

 

[Finance Dave]

I'm sorry you're going through this, but look at the bright sides! You have time to prepare, you have minimal debt, and you love your work! I'd do a sit down with your spouse and brainstorm other related career areas you could find work and start looking. Re-direct any savings to a liquid account for now. Start networking with friends and family in case they hear of a job opportunity you might like..."fortune favors the planner".

Hope all goes well.