REDUCTION IN FORCE. Layoff. Redundancy. For months now, the media have been running articles about technology companies shedding workers.
In October, the headlines became personal: My manager eliminated my position. It was the first layoff in my 37-year career and an early 60th birthday surprise. My last day would be in mid-December. After another year of positive performance reviews and accompanying financial rewards, the news was a shocker.
After that fateful call with my boss, my thoughts immediately turned to our retirement plan. Landing an interesting role is harder at this age, so losing your job can mean starting retirement. I’d planned to work a few more years, but now I wasn’t certain I could or indeed wanted to work again. I’m grateful to have that choice, something my wife and I have worked hard to achieve over many years, with help from lady luck.
In that moment, I also felt grateful to HumbleDollar’s editor. Jonathan’s lifelong work has transformed the way we save, handle debt, and invest through the stock market’s ups and especially downs. I felt we had a solid retirement plan, though my RIF—reduction in force—meant we fell short of attaining a few lesser savings goals. It took about a week to rework my planning spreadsheet for our new reality. In the end, if I retired right away, the odds of dining on dog food seemed low.
While I wasn’t happy about leaving on my employer’s terms, at least those terms meant I’d go with a good severance package. To be sure, the severance pay took a big haircut from taxes, because its December arrival was on top of a full year of normal income. Still, the money pushed us past our retirement savings target and did so ahead of schedule.
What can you learn from what happened to me? Here are six tips:
1. Save for an early retirement. According to a study of expected vs. actual retirement ages, most retirees leave the workforce sooner than planned. Only 24% of workers expect to retire at age 61 or younger, and yet 42% of retirees had stopped fulltime work by then. Having saved as though I was going to retire early helped me avoid panic when I was hit with my RIF.
2. Manage your career for the long term. When young, there’s a strong temptation to switch jobs for better pay. Indeed, in that career phase, job hopping can sometimes quickly boost your salary. My advice: Don’t let switching become a habit. While it may help in your 20s, it could cause you to miss valuable benefits when you reach your 40s and 50s. For instance, my former employer lets employees age 55 or older with 15 years of service keep nearly all their stock grants when they leave. That sort of valuable benefit may elude those who job hop.
3. Think about how you’ll replace your paycheck. From your first fulltime job until your late 40s, it’s fine to focus on saving for retirement and on maximizing your retirement portfolio’s return. But when you hit age 50, pause to consider exactly how you’ll turn your growing retirement account balances into dependable income. I realized we hadn’t amassed enough in our 401(k) and IRA to yield the level of paycheck-like income we wanted. We started a taxable investment account—one earmarked for retirement—and shoveled still more money into that.
4. Shed debt to shrink retirement needs. We paid off our mortgage—our only remaining debt—early on. That freed up more cash for savings, lowered our retirement income needs and simplified our finances. Perhaps it wasn’t the most financially rational thing to do, but I was happy we’d done it when my job went away late last year.
5. Choose “enough” to unlock happiness and help you achieve your retirement goals. In The Psychology of Money, Morgan Housel notes, “Enough is not too little. ‘Enough’ is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.” During my peak earning years, we avoided many choices that would have raised our lifestyle bar to a level that would have been unsustainable in retirement and which would have damaged our savings rate. We’ve never been super-frugal, like some friends I admire, but we found a sense of enough that left us with lifestyle expectations that are more like the Smiths than the Vanderbilts.
6. Invest in the heart, too. A life change like retirement is fraught with emotion, especially when—like mine—it occurs “off time,” a term Nancy Schlossberg uses in her book Too Young to Be Old. Schlossberg’s discussion of transitions helped me think through my late-in-life RIF. While my entire career has involved embracing and supporting faster change, and I understood my employer’s reasons for shedding employees, I needed to reframe this sudden life change in a way which made sense for me. I also noticed my wife of 35 years was experiencing different emotions around retirement. Planning a happy retirement for two also involves understanding and accommodating your partner’s different perspective and needs.
Now that a few months have passed, is kicking the paycheck habit what I want? I love building software, and I miss the people and problem-solving. I might return to fulltime work for the right role—one that involves meaningful work, and which uses my time and talents effectively. Still, for now, it’s a wonderful feeling to know that my time is solely my own.
David Powell loves thinking about personal finance, spending time with family and friends, traveling, hiking, cycling, music, exploring new restaurants and sampling wines. His software engineering interests are focused on new technologies that improve security and trust in computing systems and software supply chains. Check out David’s earlier articles.
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Hi David,
Sorry to hear your story.
Oddly I am 59 and considering retirement soon myself. With that said I am sure if I was let go for any good bad or indifferent reason the internal monologue of my brain would be all over the spectrum.
A couple of thoughts and comments,,,
Best of luck
The RIF process is opaque by design at most companies so no reason was given for eliminating my position but as a shareholder it makes sense. The industry experienced a shock wave of demand from the pandemic, pulling forward years of future growth. When life finally returned to normal, demand dropped below trend hurting current revenue. Inflation also pinched earnings on the expense side. I’m just one of about 200,000 people in the industry affected so far. Companies are still hiring but typically in much lower level roles; few posted positions are for M2 or M3 managers.
I was laid off from the government when I was 56, got injured on the job, and decide to make lemonade out of lemons. We had paid off the house many years ago and had put away funds to educate our three children. It was hard when I was “let go” as I was still a young man. Since we’ve always lived under our means, I took a couple of years off to rest up and get stronger. Was on disability for almost half a year but since I had the years in, took my federal pension so we’d have that steady income.
After those couple of years, was feeling a bit stronger so found a part time job doing something I truly love. Now, ten years later, still doing that part time gig at a different company and couldn’t be happier. When one wants to work but doesn’t need to, puts a whole new light on things. I work three days a week and look forward to going in. Since we live comfortably on my pension, my paychecks & dividends all go into savings for that “rainy day”. And having a spouse who loves her job helps also.
Point is, I survived being laid off at an early age. Once I took control, decided to find part time work doing something I love which makes all the difference. At 68, living my best life & have never looked back!
David thank you for sharing with the HD readers. I had same forced out ‘n done over eight years ago. The adjustment took a few years and today reading your experience provides comfort in knowing there is nothing anyone could have done to keep being employed after fifty five. It is simply the luck of the draw. You and I have been retired, we did not retire which takes on a different outlook to remain positive and productive in the remaining years after the career is ended by others. As the costs go up it takes longer to save a nickel by DYI remedies around the home, but we are still alive waiting for the next post from HD authors like yourself.
“Consultant” is an ancient Mesopotamian word meaning “Sit on your ass, sound wise and get paid for it.” Clients define it as “Someone who solves problems you did not know existed in ways you do not understand.”
28 years ago, when I saw my TV news career winding down to its inevitably ignoble end at age 40, I sat down and made a list of the things I was really good at and the unique knowledge I had compiled, and tried to figure out how to make a living out of them. (It must have been on someone’s advice, since I’m not smart enough to have figured it out on my own.) And I decided to become a PR consultant and media trainer.
Best guess is that I have roughly quadrupled what I would have made if I had stayed in TV news, and I did it by mostly working from home in my gym shorts.
David, I’ll bet your 37 years of accumulated expertise is worth a fortune to somebody. You might consider helping yourself to some of that as a consultant.
Hi David
I hope you were not let go from Intel (rule 70 was the spoiler alert :-)) – ended up in the same situation. Have until June 30th to find another job at Intel or pack up. I am caught between throwing the towel vs. trying to find another job. I am by default interviewing around only because my wife is doing her PhD and have to wait for her to finish in a few years before we can truly kick in our retirement plans. Will look into some of the references you provided.
-Duke
Best wishes in your job search, it’s tough all over our industry right now. Networking really helps
David, thanks for an interesting article and best wishes for a happy retirement. I’ve found that energetic, creative people have no problem putting their time to productive use, and the new freedom is wonderful.
I agree with you about the mental benefits of paying off the mortgage—it is indeed much more than a purely financial calculation, and it contributes greatly to a good night’s sleep!
I retired at 60 but immediately started some very light consulting. By working about 8 hours a week I earned enough to not have to touch our investment income. That was seven years ago. I cut consulting way back two years ago and do extra volunteer work now. You might consider some light consulting work in your field as an alternative to working a full time job. It’s worked well for me.
Thank you. At 57, I am grappling with this life event and wondering if I should put myself through this in case I get axed.
How did you manage the additional cost of health insurance until Medicare kicks in? Did you save up for this deliberately?
Yes, I saved specifically for healthcare costs in retirement in an HSA and with I Bonds.
Thank you. Good article and good suggestions. I retired in 2014 and was very thankful for having managed to survive the Great Recession of 2007/09. Had I been laid off, not only would it have been difficult to: a) find another job, and b) at a similar salary, it would have greatly affected the company portion of my retirement savings. Given the compounding effect of savings over time, the last 5 years of retirement savings will make up a significant portion of our career ending retirement savings. If you can afford it, your suggestion to save early/save often is spot on.
You’re welcome. I would have loved to save even more. I’d planned another 2-3 years of work which would have put the cherry on top. I’ve stopped thinking about that to focus more on just feeling gratitude to my younger self for the cake and icing we did save.
David,
I went through the same thing you are going through. My company was bought by another and most of the better paid senior staff got the ax. I was 62 at the time and had no interest in looking for another position, partly because we did not want to relocate. I had been thinking about retiring and the layoff just accelerated my plans. These are a few things I learned:
Have fun!
Bill
All your points resonate, thanks for sharing those Bill.
David,
I was a life-time computer geek.
That, too, ended for me when I was 60.
But, in my case, it was voluntary. I saw the writing on the wall so to speak. So I left without having to be “pushed out”.
At first I also missed the problem solving and, most of all, the people I worked with.
But “Time Wounds All Heels” 🤪
Now I spend my time solving all sorts of different puzzles. And spoiling my grandchildren.
Excellent article! And good luck on the rest of your life’s journey.
David, your piece hit home for me on several points. I was laid off twice and quit a dead-end job before I was laid off. Luckily I found my “last job” of 20 years and retired on my own terms at age 67. But I had to navigate through a very upsetting divorce and financial setback, so maybe you can add that as point No. 7. I very much agree with every single one of your points – although I did not actually plan for an unexpectedly early retirement. Good luck with your transition away from working life.
Not sure if “congrats” is the appropriate word. I was in many (yes, many) RIF. Yes, there’s a temporary sad feeling after walking out that door for the last time. However, new opportunity has knocked on my door many times. Not sure what new opportunity knocks on your door but I’m sure if you listen, you will hear it.
Your article really hits home. The fact is “be prepared for “forced retirement” before you hit 55 years. According to The Center for Retirement Research at Boston College; “60% of retirees sign up for benefits before reaching their Full Retirement Age (FRA)”. And you can bet most are applied for out of necessity. My advice: Find a separate gig now that can supplement your income when this happens. Who knows, it may turn into a fruitful endeavor that will absorb the pain from forced retirement.
Hi Morris. My wife is four years older so she’ll apply for Medicare in August. Meanwhile we’re both on COBRA from my old employer, the cheapest coverage I’ve found. I’ll stay on that until next June then start an ACA plan with an HSA from the same insurer. Jonathan wrote a nice article about his own health plan shopping experience which was helpful.
We should start my wife’s SS benefit at her full retirement age 66y 8m in 2025. I’ll use my early retirement savings (four different buckets) to defer my benefit and her spousal benefit as long as possible, likely at least until the year I turn 69, and with luck at age 70. We’d be fine starting at my FRA but getting that 8% bump each year would be nice.
David, Thank you for the good planning advice. Re: “Jonathan wrote a nice article about his own health plan shopping experience which was helpful.” I just tried to find this article by searching using keywords, and by attempting to scroll through the list of all the articles written Mr. Clements (my scrolling finger wore out before I reached the end of the list). The article you refer to would be very useful to me as I am starting to research health plans. Could you provide a link to the specific article?
Thanks.
You’re most welcome. Sure, here you go: Maximum Thinking – HumbleDollar
Welcome to retirement and congratulations on the package. I retired voluntarily at 53, so no package. I entirely agree about paying off the mortgage, you still have costs for the house, but getting rid of that large monthly payment is freeing.
Thanks David … it sounds as though you were well prepared for this surprise RIF. Your tips and lessons are well worth considering. I would be curious to know a couple of further things. First, how are you and your wife handling health insurance, since you are not yet eligible for Medicare? And second, how are you handling your Social Security claiming decision? Do you plan to delay claiming, perhaps all the way to age 70, by using other assets to live on? I’m 63 and still employed, but would like to retire relatively soon. Thanks.
Oops, hit top reply. See response above.
We found in NH that a bronze plan was essentially free if you can limit your taxable income (ie IRA/401K) to 40K and then use savings/taxable brokerage for balance of income (make sure you account for capital gains in the 40K figure). I believe premiums differ from state to state for like plans however.
Not having to set an alarm clock five days a week since my job ended has been a surprisingly joyful facet of life since my job ended. Now when the alarm goes off it is because I have something planned that I really am looking forward to.
Good luck on your next adventures.
Thanks, William. A big house renovation delayed the sweet experience of waking to no alarm. Now that work is done, it is a great simple pleasure.
Thanks, David. I’ve been on both the manager and the employee of the RIF issue and you clearly have a better attitude than many. After the initial shock, many people forget to think about the choices they have. Enjoy retirement.
David, As a contributor to 7% of the market, we S&P 500 investors all thank you for your service. Best wishes for your future endeavors.
One other thing. You write that you love building software, miss the people, and the problem solving. It sounds like your experience is perfect for part consulting work to supplement your income and work on your terms.
Hi David,
I think the most valuable tidbit in your article is the fact that 42%of workers stop full time work by 61. My wife and I essentially were one of the 42% as we each retired at 62, both due to early layoffs, me due to downsizing, and my wife due to COVID.
The lesson may be that self portfolio managers and financial advisors should set to their retirement plan to meet financial goals by that age. If using a target date plan maybe use one that is five years earlier than your Social Security full retirement age.
David
Great advice, David. It’s good to see an article from you. I’m just sorry it was inspired by such a circumstance.