I was laid off after 23 years— how do I save my future retirement?

I saved aggressively with $670,000 in an IRA, and $30,000 in a 401(k) and $4,800 in an HSA. My house is valued at $210,000 and I’ve got $80,000 left on my mortgage. I have loans to pay for home upgrades I’ve recently completed, but they don’t worry me as they are long-term loans that I can pay off at any time. Plus, I expect to be able to take care of them with my portion of my parents’ home sale. I also have $12,000 of severance remaining that I can try to stretch for three months, but I’m hoping a job appears long before that.

If I do nothing, my IRA will hit $1.38 million by retirement, but I’m at a loss as to the road to get there and what missteps I should avoid. 

Sincerely,

Struggling To See The Forest Through The Trees

See: I’m 49, have $1.2 million in savings and just lost my job — can I trust the retirement calculators that tell me it’s OK to retire?

Dear Struggling, 

It’s wonderful that you had a severance package to rely on during this time, but I can understand the stress and pressure to find your next steps. The fact that you’ve saved aggressively for retirement is great, and I applaud you for prioritizing it. 

Let’s start off with the very first thing you should try and avoid: taking early withdrawals from your retirement accounts. You didn’t mention if you had any other savings outside of the 401(k) and IRA, but if you do end up having to tap in to any of your savings, I would not start with any retirement assets. Those are meant to grow without disruption for as long as they can — something you already know, considering you’ve calculated what your IRA balance would be in the future. 

Obviously, it’s a little late to say you should build up an emergency fund for a situation like this since you’re already facing this scenario. If you have any sort of short-term liquid savings, it would be best to lean on those first. Dipping into your retirement accounts early often comes with penalties and taxes, unless you have a qualifying reason to do so (and a layoff is not one of them, unfortunately). 

Of course, sometimes tapping into retirement assets early is unavoidable. 

“If you are forced to take early withdrawals from a plan, take only what you need,” said Sean Pearson, a certified financial planner. “Rather than projecting that you will need $3,000 a month for five months and taking a lump sum, take monthly income that you can stop once you’re able to reset income or reduce expenses.”

Remember you’ll have to pay the taxes and a 10% penalty for those withdrawals come tax time, he said. 

I’m focusing mostly on your retirement assets in this response, but I do want to say you should keep an eye on those long-term loans you have, and don’t bank on a home sale or assets you can’t already account for to wipe any debt clean. Now may not be the time to pay that debt off, but if the interest rate is high, after you’ve got your footing with a new job, it would probably be in your best interest to put your attention to those loans so you can continue to aggressively save for the future, any other goals you have, and an emergency savings account, too. 

Also see: One laid-off tech worker’s odyssey: five months, 100 job applications and 25 interviews

Back to the present. You didn’t mention if you filed for unemployment benefits. There are wage requirements, and severance does impact your eligibility depending on the state, but it’s still something to consider if you haven’t looked into it already. You can learn more on the Department of Labor’s site CareerOneStop. 

If you don’t already have one, make a financial plan, Pearson said. There are so many factors we just can’t know for sure, such as future interest rates, investment return rates, cost of living, our own health and living arrangements and so on, but having a plan that you can adjust accordingly will save you a little bit of a headache — and hopefully, some money. 

“We live in a landscape where most people don’t work for 40-straight years with consistent raises and promotions, without either time away from the workforce, or stages where earnings or expenses will fluctuate unexpectedly,” Pearson said. “Ideally, your financial plan will be flexible enough to adapt when unexpected changes occur.”

For the next few months, just buckle down and keep your eye on the prize. You’ve got $12,000 in severance money left, you checked off some of the items on your “honey do” list and you’ve taken this opportunity to reset. Those are all positives—and I know, it can be so easy to forget the good stuff when you’re worried. You have 23 years of experience you can absolutely put to good use in another job.

Beyond applying for jobs online, reach out to your network or find some people you can connect with (such as on LinkedIn or online and in-person communities with members of the same field you’re in, or want to be in). If it’s been a while since you’ve updated your resume, take the time to do that now, and have a close friend or trusted professional review it. Some libraries even offer resume writing workshops or services, if you need that. 

Try to curb your spending during this time as much as you can without stripping yourself of all joys. The longer you can keep that severance money working for you, the better. Try not to look at any of your investment accounts, since fluctuations from the markets may not help you feel better.

Instead, focus on your goals: when you get that new job, what’s the first thing you’ll do to set yourself up for financial success in the future? How much will you put toward your retirement accounts? What about other savings goals? And can you draft a debt repayment plan for those loans and your mortgage? Sometimes, envisioning the bigger picture and jotting down all the ways you’ll get it can really help you stay focused when you’re overwhelmed and worried.