What happens when you get laid off and you’re over 60? Are you going to retire? Are you going to go back to work? Are you going to seek further employment? That is a big question facing a lot of people.

The first thing I want to encourage you to do if you get laid off and you’re over 60, is just take a breath. I mean, for maybe 24 hours to 48 hours, you want to sometimes automatically just go out and start doing things and start reacting to things and sometimes that’s the worst thing you can do. I remember from playing football and also coaching football that we always coached our kids and they always coached me when I was growing up, when you really, really, really get pounded on the football field and you’re knocked down and you’re not sure whether you’re hurt or not, just lay there for a second, for a few seconds and just see. Make sure your head’s still connected to your neck and your arms are still connected to your shoulders and your legs are still connected to your hips. All of those things. When it comes to getting laid off and you’re in your 60s and you were planning to work for a few more years, that’s exactly like getting hit and getting laid off.

So you just need to take 24 hours, go to the beach, walk around, go to a park, sit there, read a book, do something but just take a breath. Because a lot of times when you jump up on the football field and you’re really injured, I’ve actually seen guys who had broken legs and they were broken, but when they stood up to try to walk on it, it became a compound fracture where the bone came out. So you don’t want to get up, jump up, do something really quick right after you just get pounded with a layoff and then really do something dangerous because you made a quick, knee-jerk reaction within the first 24 to 48 hours.

The second thing you need to do after you’ve just given yourself a chance to breathe is you need to analyze where you are. You need to analyze your bank account. How much is in the bank account? How much is in your savings account at the bank or a money market? How much is in your 401(k)? How much is in an after-tax account where you don’t have to pay tax on all of it to take it out? If you’re 60 or over, if you’re 59 or over, you can take money out of an IRA or a 401(k) without any penalty, but you also are going to have the taxes. So you just want to do an analysis.

And here’s another thing. If you got laid off, chances are you might have gotten a severance package. Well, is that severance package, is it going to come to you as taxable and is it going to come in a lump sum so that it all comes at one time or is the company going to pay that out over a period of months? I’ve actually had people that they paid out that severance package over a six-month period, come to find out the company was trying to just delay, delay, delay that person getting on unemployment so maybe the company wouldn’t have to pay the unemployment to the unemployment agency. So whatever it is, read your severance package, know your severance package, analyze where you are because if you’re going to go somewhere, if you’re going to make some moves, if you’re going to make some changes, everything starts with analyzing thoroughly where you are right now.

So here’s number three. What are your immediate needs? And I’m talking about needs here. Now’s not the time to go remodel the kitchen. Now’s not the time to go on that exquisite vacation to Europe and those kinds of things. The first thing you need to do is you need to analyze your need. Number one is income. What’s going to pay the grocery bill? What’s going to pay the light bill? What’s going to pay the gas bill? What’s going to pay the mortgage? All of those things are what do you need? Now you’ve analyzed where you are financially. Now we’re going to see what’s the drain going to be on it over the next few months while either A, you decide to retire completely or B, you get another job and go back to work. So the first thing is analyze what kind of income you need.

Second, you’re 60 years old so you need to analyze your healthcare. Where’s that coming from? Are you going to COBRA the package from work and just continue your health insurance from work if you got it from a group policy at work? Or are you going to go out on your own and get your own policy? And if you’re not 65, you can’t get Medicare. So I believe one of the biggest costs you’re going to have and one of the biggest things you need to consider is your healthcare and where is that coming from?

And let me speak to debt as well. If you’ve got debt, and a lot of people when they get to their 60s, they’re being wise about things and they’re paying off things. They’re really paying down credit cards or student loans that they’ve inherited from the parent PLUS loans from your kids, and you’ve really been putting a lot of extra money for there. I encourage you for a month or two, just pay the minimums. And that’s something you very seldom hear out of my mouth, but just pay the minimums and just let things settle as you begin to see what’s going out of what I have. And then you can come to an analysis and you can say, “How long can I last this way before either I, A, need to make a decision on drawing money from the 401(k) or the IRS, or B, I need to get a job and go back to work?” So the third thing is you need to make sure you’re covering your immediate needs.

Number four, you need to now begin to make a decision. “Will I go back to work? Can I go back to work?” Now, let me tell you where that’s going to tie in with number three, your immediate needs. A lot of you are going to have the idea that, “Hey, I’m 62,” if you are, or older, “I can go turn on my Social Security.” Remember, there’s a little gotcha in Social Security that says this year you can only make a little over $22,000 this year. Or if you’re drawing Social Security for every $2 over that, you’re going to have to pay back a dollar of social security. So you have to make that decision. Are you ultimately going to really seek a job and go back to work before you turn on your Social Security if you have not reached your full retirement age?

Because if you do get a job, and I’ve seen people make this mistake, if you do get a job, you’ve turned your Social Security on at the lowest level, and then you get that job and you’re making more than $22,000, and for every $2 over that, you’re going to pay back a dollar of Social Security. So I get it and then I give it back. So Social Security is a really big issue there, and it’s also big to determine are you going to start taking money out of the 401(k)? And there’s several options you have with the 401(k). Can you leave it there? Yes, you can. Can you move it out into an IRA? Yes, that’s what most people do. Or can you just let it sit there and maybe you want to move it into another 401(k) with a future job you get? So will I go back to work is the fourth thing you need to consider, a really big thing to consider because it makes a difference in what you do in some of these other areas.

Number five, be careful about your taxes. And this is particularly true if you get laid off toward the end of the year. Now, here’s what I’ve seen happen. You get laid off in October or November or even December, and you then get a big severance package and that severance package, oh wow, it’s great if it’s six months. But like I said earlier, if they pay that severance package out in a lump sum in December, then you not only have that entire year of income, but then you’ve got six months of next year’s income in that severance package dumped into this year. So you could really blow your taxes out of the water.

Another thing is, do you draw any money from the IRA to get you to the end of the year? How much money are you drawing out of that 401(k) or that IRA? That’s all going to come out as regular income. You need to treat that exactly like a paycheck and have them withhold taxes for federal and for state so that you don’t have that big aha surprise at the end of March. You say, “Well, I didn’t get a full year of income, but I took a lot of money out of the IRA, but I didn’t pay any tax on the IRA,” You’re going to pay tax on it. You’re going to pay tax on it when you file your income tax the following April. So be really careful that all of these things together don’t blow your tax situation out of the water and just really blow what you’re having to pay in taxes up.

So let’s review and wrap this up. Number one, if you get laid off and you’re 60 or more, just take a breath. Don’t do anything quickly within a day or two. Just take a breath.

First thing you need to do after that is the second thing in the list is you need to analyze your situation. Where are you? What money is coming in? What money do you have?

The third thing you need to do is isolate what your needs are, what you really, really need, and begin to pay those things and take care of those things.

The fourth thing you need to do is decide are you going to go back to work or not?

And the fifth thing is you need to really make sure you don’t blow yourself out of the water when it comes to taxes.

Now, let’s wrap this. All of these things should be taken care of with a retirement blueprint, with a retirement plan, with something that when you really crest the age of 50, you need to start putting together, where’s my income coming from? What am I going to do for inflation? What am I going to do with my investments? What kind of tax am I going to have to pay in retirement? And that would help you prepare for something like this that happens to you when you’re in your 60s. Hey, if you just got laid off, you can’t do anything about it. But if you’re watching this thinking, I might get laid off one day and I want to prepare for it, then you need to build a retirement blueprint. That’s what we do at our firm. Find somebody to do that for you. But you need to find a retirement blueprint.

Now, if you like this and you want to learn a little bit more, we’ve got another program here. Click the icon you see here, and you’ll be able to go to one subject where I just talk about what to do with the 401(k) and the options you have with the 401(k).

And by the way, if you like this, hit the subscribe button and we’ll notify you whenever we have another event, when we have another show coming out. So, hey, I’m Tom Mosley. You’ve given me 8 to 10 minutes. I hope I’ve increased your financial knowledge because that’s my goal every single show.