Transcript: Episode 136 -: Losing Your Job Near Retirement

SUMMARY

Introduction to today’s episode.

Laid-off employees in America and retirement.

What happens if you’re laid off prematurely?

The mental impact of being laid off early.

Retirement planning in advance.

Steps you can take to make your finances leaner after a layoff. (4:48)

The first step is to look at the budget.

Take stock of your savings.

Social Security and fixed interest. (7:56)

Social Security is like a cash credit line.

Sometimes it’s just little tweaks that can take the pressure off. (10:29)

The stress of being laid off close to retirement.

The importance of having a plan that is assisted by people who know what they’re doing.

How to evaluate your investment portfolio after you’ve been laid off. (13:22)

Evaluate investment portfolio from time to time.

Consider rolling out 401K into IRA.

When to take money out of your 401K. (15:37)

No definitive right answer for every single situation.

If laid off, no fault of your own.

The importance of planning for the spouse –. (18:15)

Key Considerations

All Hands Analysis (20:35)

Holistic approach to retirement planning.

The importance of trust factor clients.

There is always something that can be done if you take the time to plan. (22:44)

Host Jordan Rich

0:03

Welcome. This is the Retire South Shore Radio podcast produced by South Shore Retirement Services, inviting you to get started on the path toward your dream retirement today. Hello, I’m Jordan Rich with the founder and president of South Shore Retirement Services. Mark Rowlette. Enjoy today’s episode. We welcome you to another edition of Retire South Shore Radio. It’s great to be here. I’m Jordan rich. And I really enjoy sitting down with my good friend Mark Rowlette, the founder and president of South Shore retirement services. It’s been about a quarter of a century sir. Mark, company continues to grow. We’ve got some exciting news on the website, RetireSouthShore.com about the growing radio network, this wonderful station and many others. So congratulations. And here we are armed for bear ready to go,

Mark Rowlette

Yeah, the radio station and the radio, you know, reaching out and getting information out to people continues to grow. The staff here continues to grow, we have Eva is our latest addition to the staff over here. And she’s working with Becky, who you’ve known for a number of years, on our marketing and making sure that everything that gets out to people is good looking and good information.

Host Jordan Rich

Well, it’s all part of that All Hands Analysis approach that we will continue to talk about and remind people about, you know, the topic today hits home with so many people. I don’t know of anyone who hasn’t at least had somebody in the family who’s been laid off or let go. That’s the nature of work in America for the longest time. But particularly important today is what happens when somebody is laid off very close to retirement. And this does happen. So it’s a great topic to talk about.

Mark Rowlette

Yeah, we talk week in and week out about different strategies, ideas and things to do when you’re in retirement to make sure that you don’t run out of money. Because that’s our kind of our mantra, nobody should have to worry about running out of money. But what if you lose, I guess, control of the last few years of your working life by being let go of being you know, some severance package or just the business that you’re in, decides that they no longer need you or your position. And for some people, they can bounce back relatively quickly.

Certainly from us trying to find talented people to come and work at South Shore, I know it’s difficult to find people. But for some folks who don’t bounce back, bounce back quickly, it can have a significant impact on their retirement assets, their retirement outlook and their future. So you want to be able to address it. For some folks, it has a massive impact. But for some folks it doesn’t. And unless you have an actual strategy in place, how would you know whether you’re going to be okay or not? So I thought we talk about some kind of action plans – If you are one of those people who got laid off prematurely before you were ready to retire.

Host Jordan Rich

Which brings to bear the important note that you start, really, if you’re smart about this retirement planning before you reach that age, because you don’t want to wait till you’re 70 and then get laid off. Let’s say it’s always a good idea to start in your 50s or 60s, So you’re prepared for for anything. But one thing you mentioned, that is important, and we’re not going to ignore this – is the mental effect. It’s the devastating sense that you’ve lost what you’ve done at the very tail end. And that can have a real negative effect on people.

Mark Rowlette

Yeah, we say this every single day, every week, in any presentation that we’re giving, on any radio show that we’re on – that there’s a huge psychological impact to many people when they go into retirement, maybe feeling like you lost your identity. And you say “this is something that I did for 40 years. And now I don’t do it anymore.” And it’s a difficult enough transition for people who are voluntarily making the decision to retire. So if that voluntary decision is taken away from you a few years before you actually retire because you get laid off. Can you imagine how much more difficult that would be for folks, so teeing things up and making sure that you’re going to be okay ahead of time obviously makes sense. But if you don’t have the opportunity to have time to make that decision, and you just get laid off. There’s things that you should be addressing and things that you should be doing.

Host Jordan Rich

That’s what we’re going to focus on, then. It’s sort of hypothetical or generic. We’re not using any specific cases here. But in the case of a layoff, if somebody had prepared – what should they have thought about in in advance, let’s say?

Mark Rowlette

Well, yeah, it’s very similar to actual retirement planning. It’s just kind of, you know, 11th hour retirement planning, I suppose. Where, you know, the first and foremost is look at your budget. I mean, I think that’s just logical for everybody. Everyone should be looking at their budget. Not to put you on a budget, but look at what you’re spending money on.

And look at it from the perspective of, “can you make it a little bit leaner?” We talked about this a couple of years ago. W

hen people were in lockdown during the pandemic, they really got a good kind of dress rehearsal as to how much money they needed versus how much money they wanted. So I think when you start looking at what you’re spending money on, what do you actually need? And what do you actually maybe not need. And quite honestly, sometimes, it’s a blessing in disguise. Nobody wants to get laid off, but you start looking at what you’re spending money on. And maybe you have for example (as I have) Pandora as a music app, and I also have Spotify. Do I really need both of them? I mean, listening to both of them at the same time, just little things like that might be able to help individuals figure out what they actually need to cover their expenses, especially if they’re trying to find work going forward.

Host Jordan Rich

You’re listening to Retire South Shore Radio. Go to the website, RetireSouthShore.com. You’ll get much more information on this and many other related topics. But if you have a specific question, that’s been bugging you, nagging you – there’s that 15-Minute No Obligation Strategy Call, an opportunity to get your specific question answered. Absolutely no obligation. Just go to RetireSouthShore.com. There’s a simple grid calendar system, you can set up your call in the comfort of your own home.

So yeah, we were talking about the 11th hour, I love the way you put that. But if you have had that opportunity to think about a budget, think about what you’re spending, that’s a first step, what are some of the other steps that people should have taken maybe in advance to, to make this all easier?

Mark Rowlette

I think for a lot of folks, it can be a bit of a wake-up call or a reality check as to what they’re spending money on. And not to say that people shouldn’t enjoy their retirement because I think that’s so important. But when something like this happens that you didn’t expect three, four or five years before you were planning to actually take that retirement, the budget is obviously really important, I think it’s important to kind of take stock of what your savings are. And when I say savings, I just mean savings, you know, your emergency fund.

We talked about that the other day, where how much money do you have that if you are laid off, and you are far enough away from retirement, that you were actively looking for another job? Do you have enough money to cover you for the next six weeks, the next six months, whatever it might be, to have that emergency go to Oh, no money, that you’re able to cover all your expenses quickly, then to take it a step further. The way that we always look at things, we like to try and squeeze a penny out of anything that you can squeeze a penny out of because why wouldn’t you? If you do have an emergency reserve and it is sufficient to cover you for that three-to-six month period? Is that emergency reserve actually making you any money?

You know, Jordan, we talked about this recently, where, people became complacent with “money that I have is my go to, you know, savings. It doesn’t make any money. But that’s okay.” Well, fixed interest is a thing now, right? I mean, interest rates have been going up for the last year or so. And it’s a negative for people. And I feel bad for them for going to buy houses and the mortgage rates have gone up, but it’s a positive. And people should be looking at it where savings accounts are now – 3% and 4% for savings accounts. So that can actually help you and maybe stretch that penny out for an extra month while you’re looking for other work.

Host Jordan Rich

If you’re in the age range we’re talking about and you’re approaching retirement. So maybe you’re in your late 50s or 60s. There’s also the Social Security factor, I would imagine that comes into play very important.

Mark Rowlette

My next topic. I think people should be looking at Social Security, especially if you’re really close to retirement if you’re 62. Plus, maybe Social Security might dig you out of a little bit of a hole and help you support your lifestyle without having to go all into your own investments or your own money. A lot of people, when I’ve talked to them about it, say “Well, I’m 63 years old. What if I go back to work? I’m going to be making too much money because there’s an earnings limitation, right when I take Social Security prior to full retirement age.”

But Social Security has this rule inside of it that says, if you if you file for Social Security, within 12 months, if you decide or you get a job, you can turn Social Security off, pay them back the money that they paid you and it’s like it never happened, right? And it continues to grow. And you could take a distribution, say, from an IRA account and pay it back. So it’s not like you’re actually having to write them a check. I mean, technically are but where you get that check from can be vastly different types of the way you describe it.

Host Jordan Rich

It’s almost like an emergency loan that is available to you, like a like a cash credit line. And you can use that. That’s very effective in the All Hands Analysis team approach. That is what South Shore Retirement Services prides itself on. I mean, you’ve got people who understand the regulations, the rules and all the minutia, that is Social Security. So that’s an important factor for people.

Mark Rowlette

As I think you know, every option should be evaluated. Maybe what isn’t a good strategy for one person, maybe is a good strategy for another person. Maybe in a couple situation, if you think about it, one person gets laid off, and they needed that income. But the other person when they were both working was putting lots of money into their 401K plan, if you slow down that contribution into the other person’s 401K plan to put more money in your pockets, on a day to day or week to week basis. So sometimes it’s just little tweaks, it has nothing to do with where you put the money. It’s just how you look at the dollars that are coming into the bank every single month, little tweaks can take that pressure off, because obviously somebody who gets laid off close, anyone who gets laid off is in debt, maybe don’t expect it, and they’re not generally happy about it. Sure. But as you get close to retirement, and you’re nervous that you’re not going to be able to find another job  – that can create a massive amount of stress for an individual.

Host Jordan Rich

Well, I think you’re outlining the fact that there are options, and many more than you might think that it’s the devastation that hit you when you get that pink slip. So close. But when you realize that there are options, the other thing that I was thinking about was, we often talk, Mark, about what people have, and they don’t know what they have particularly related to their employers. And it helps to have a firm like South Shore Retirement Services dig in and get the answers. But sometimes people really, really need to investigate what they have coming to them – maybe money that’s there that the company is not necessarily coming forth and telling them about, but it’s there.

Mark Rowlette

Yeah, possibly. I was with a client a couple of days ago, who retired from her employer, and then all of a sudden got a letter from them saying this large lump sum of money has been segregated to help her pay for her health care in retirement. And she didn’t know she was going to get that because it was an unusual thing.

But yeah, I think sometimes you want to look at what the benefits are if you’ve been laid off. If you get a severance package, is it a type of severance package that you can control how you get the money so you can take unemployment? How is health insurance going to be a function when you go into retirement? Everyone is aware of Cobra and everyone’s also aware that it’s very expensive. But maybe there’s this transition period from the point that you get laid off to the point that maybe you’re able to get on your spouse’s health insurance. And Cobra sits there.

Stu Millard, who’s our Medicare specialist, does a really good job of helping people and educating people on things like you just said, things that you didn’t know you didn’t know, right? I mean, if anything can help somebody out during that period of time, we want to make sure that they’re aware of it.

Host Jordan Rich

Having a plan as always the best route to take, and having a plan that is assisted by people who know what they’re doing is especially important. And I can just say for my own sake that you, Mark, and your team have been around a long time – you particularly for a quarter of a century (you old geezer, you) and you’re doing this kind of work, and it’s multiplied every single year with more regs, more information, but I know you thrive on it.

And that’s why people appreciate you. Again, to find out how you can get a question answered in that 15-Minute No Obligation Strategy Call – a very effective method – just go to the website, RetireSouthShore.com. There is a solution. In fact there’s a whole bevy. Mark, as we’ve discussed, what about the investment side? We talked about savings. We talked about making sure you’re budgeting appropriately, which everyone should do. You’re going to be able to tell us how the investments can work in our favor?

Mark Rowlette

Well, I think everyone should be evaluating their investment portfolio from time to time anyway. But if you’ve if you’ve gotten laid off, maybe you’re looking at it from the perspective of oh, gosh, maybe I’m going to need this money a little faster than I thought. So the obvious question is “is the allocation still correct” for somebody who may be starting to take money from those accounts. So have an analysis done and a stress test. As clients are teeing themselves up for retirement anyway, there’s no better time to do that then when the dust settles or a little bit after you have been notified that you’re getting laid off.

And to take a look at the overall allocation, then I think you start looking at “Alright, well I have a 401K plan.” If let’s say you have a 401K “Should I maybe roll it out into an IRA account?” Why might you want to do that? Well, you might want to do that because it could be less expensive to have the IRA account versus the cost of having a 401K plan. It could be that your 401K plan was very limited in its investment options. And rolling it out to an IRA is not a taxable event. But it allows you the opportunity to invest in in basically anything that IRAs invest in versus the menu of options that your 401K plan had. So sometimes it makes an awful lot of sense from a cost standpoint and from an option standpoint to roll that 401K out.

Host Jordan Rich

I know the last thing you’re thinking about when you’re laid off is Uncle Sam and paying your taxes, perhaps it’s the last thing on your list. But that does enter into all of our discussions when it comes to investments where that money is and how it’s going to be allocated, required minimum distributions are going to happen in the future. So I imagine that’s a consideration as well.

Mark Rowlette

Yeah, absolutely. I think maybe it’s not the last thing on everyone’s list that they’re thinking about. Certainly it’s the last thing on everyone’s list that they want to do.

Host Jordan Rich

Yeah, that’s the last thing I want to think about. Let’s put it that way. Right?

Mark Rowlette

But you know, maybe it makes sense to take your 401K, put it into an IRA. Maybe it makes sense to say, “Oh, well, my spouse is working now. And yeah, I wasn’t expecting to get laid off. But financially, we’re okay.” But now your income has gone down. So maybe there’s an opportunity there to start looking at some Roth conversions.

However, there’s, there’s no definitive right answer for every single situation, because maybe you got laid off, and you’re seven years away from retirement, and you’re 56 years old. Your broker says, well, now we can roll your 401K out, well, maybe you’ve been pigeonholed yourself. Because if you’re 55 years old plus, and you leave a company that you had your 401K at, you can make what’s called discretionary withdrawals of principle without that 10% premature withdrawal penalty that applies to IRAs. So just be very careful of when you should take money out, when you should roll money out, explore all options

I say this because we recently have a new relationship with a couple. She wasn’t laid off. But she retired young, which was great, because she’d done a great job saving, and immediately the broker rolled all of her 401K money out, but she wasn’t 59 and a half. So all of a sudden, she needed to start taking money out of the account. And then there is a rule that will allow them to take money out, but it’s very restrictive. Whereas if the broker who they were talking to had maybe just been a little less self-serving, maybe they could have looked at it and said, “Is there a possibility that you’re going to need some of this money? Maybe we should leave this money in the 401K plan? Because you can make those discretionary withdrawals principle?”

Actually, when they came on board, they asked their existing broker at the time who was now we’re their advisors? Why didn’t we talk about that? And the answer was, “I wasn’t aware that that was an option,” which is, again, a scary, scary thing, that he wasn’t aware that that was an option.

But I think it’s just trying to not see the forest for the trees or not seeing the forest for the trees, you’re in a situation where maybe you’re kind of foggy, because you just lost your job, and you weren’t expecting to do it. And maybe you don’t want to make really quick decisions that you can’t go back on.

Host Jordan Rich

And Mark, let’s just set the record straight on one thing, if you do get laid off, through no fault of your own – if you do get laid off, I’m sorry.  The 401K that you have been building for 20 to 30 years, that’s still in place – there’s no law, there’s no rule that says you have to take all your money out and run.

Mark Rowlette

Now generally, I’ve seen a handful of companies that require people to roll their 401K when they’re no longer employed, within a short period of time to an IRA. But I would say for 99% of companies, it’s not a requirement. You can just leave the money in the 401K until such time as you want to move that money out.

Host Jordan Rich

You mentioned the spouse, and I think this is an important aspect to all of this. If so many of our listeners are our couples, thankfully, and they’re working two jobs, one on one side, one on the other, and then one loses a job, let’s say, but the consideration is important, right? The other income, the other person’s investments, how they’re going to mesh and meld together against the importance of planning, let’s call it “by person planning”, as opposed to single person planning at that point.

Mark Rowlette

Yeah, if you’re a married couple, or your finances are together, but you don’t have to be married to do this.

If your finances are alright, and you have “house money” here, and one person gets laid off and one person doesn’t – And the person who doesn’t get laid off is contributing into their 401K, and maybe they have limited options in their 401K. And then the person who gets laid off is taking distributions from their IRA account, well, maybe it’s just smart to cut out the middleman there and say, “well, we won’t make more contributions into this 401K. We’ll have more money going into the bank from that person’s paycheck. And then we have to take less money from the IRA account.”

Tax-wise, it’s the same, but it’s options wise, maybe there’s better options in the IRA account from an investment perspective than there was in the 401K. As an Irish person who loves horses, it’s “horses for courses”, right? It’s different with every single situation.

I think the key thing that we always try to get across the show every week is that look at your options. Don’t make some rash decision. You don’t have to do it immediately. Maybe there’s something that you need to do tomorrow. And maybe you can pull money from a savings account and then you can always reevaluate and replenish funds from some other source.

But I would say, if something like this happens to you, once you’ve gotten to the point that you’re like, “Alright, what do I do next?” Pick up the phone call someone, I mean, ideally call us, it’d be fantastic, but call someone and say, “What are my options that I’m not aware of?”

Host Jordan Rich

If you decide to call Mark, his number is 781-836-4214. And in the final moments of this program today, I think the capstone on all of our discussion has to do with planning and being strategic. And that sounds a little heavy when you’re on your own. But when you have someone like the All Hands Analysis crew working on it, a lot of these things will be flushed out and taken care of. You can find the dialog. Keep referring to the drone view, as opposed to just the narrow view. When you’re laid off, you feel rotten for a couple of days, maybe for a week. So take a time to take a deep breath and let somebody look at your overall situation and help you.

Mark Rowlette

Yeah, with our holistic approach to retirement planning. It’s the same sort of holistic approach to a situation that you weren’t expecting to have happen – being laid off is always premature, because you don’t expect it. But yeah, I think all of our client relationships, it’s a relationship, right?

I realize, and everyone who’s listening realizes the stuff that we have – the different types of investment vehicles and different ways that you can position your money. It’s not like we have something that nobody else has. It’s the same things, right? Your stocks, bonds, mutual funds, ETFs, annuities, CDs, whatever it might be. It’s how you arrange things. That could be the difference between making it and not making it.

Really, it’s the trust factor. Clients that we work with truly trust us, and we take that responsibility really seriously. Besides obviously, being fiduciaries, we take it really seriously – not because just it’s a legal requirement, because this is people’s life savings. And when something dramatic like this happens,  they’re vulnerable, and they seek advice, and they hope to get advice that is in their best interest as opposed to in other party’s best interest.

Host Jordan Rich

We’ve done roughly five years of radio shows, hundreds – crazy and incredible, and we’re building the radio network as we speak.  Go to the website to find out what we’re talking about there. One of the constant themes is that, even in what might seem like the dark days – we’ve gone through the pandemic together, we’ve gone through economic inflation, hardship taxes …

Mark Rowlette

When you went through our first show with me together, I remember how anxious I was when we got on the air.

Host Jordan Rich

Oh, my goodness, we’re old pros. Now you certainly are. But the point that I wanted to make was, people are tense and nervous as you can expect. But there is always something that can be done. There’s always something if you take the time to plan if you take the time to take that big, deep breath and settle down and take a look at the big picture. I don’t know of anyone that you’ve talked with me about who has not had some option at some point.

Mark Rowlette

Yeah, most of the people that we talk to have someone in their world who helps them with their finances, right? They’re there. They’re paying someone whether it be you know, the bank, getting to utilize your money and broker having a commission and advisor charging a fee. And if there’s nothing wrong with a client strategy, and there’s nothing that can be improved upon, there’s no benefit to starting a relationship with, you know, creating a problem that wasn’t there in the first place. So I have had multiple situations where people who’ve called in from that strategy, you know, the 15 Minute Strategy Call, and I’ve met with them or we talked to them for 20 minutes on the phone and I say everything that you are doing seems on point.

In fact, I’ve actually gotten probably four or five emails, unsolicited from other financial advisors thanking me for reaffirming what they had done for their clients because they said it’s kind of refreshing because that doesn’t really happen in our industry very often. But I want to build and continue to build retirement in the right way. And we want to be good for the community and help people and obviously, I make a living doing this and everyone understands that but it to me there’s a right way and a wrong way to do it and I feel like we do it the right way.

Host Jordan Rich

Thank you for subscribing and downloading the Retire South Shore Radio podcast. Feel free to leave a review and a rating and tell your friends about us for much more visit RetireSouthShore.com. Discover how South Shore Retirement Services helps individuals and their families achieve their ideal retirements.
(End of regular podcast)

Disclaimer

Investment Advisory products and services made available through a wealth management LLC, a registered investment advisor. insurance products are offered through the insurance business rule led and Associates, LLC DBA South Shore Retirement Services, rollout and Associates, LLC DBA. South Shore Retirement Services is also an investment advisory practice that offers products and services through a wealth management LLC. A registered investment advisor, aw M does not offer insurance products. The insurance products offered by Rowlette and Associates, LLC – DBA South Shore Retirement Services are not subject to investment advisor requirements. Investing involves risk including the potential loss of principal. Any references to protection, safety or lifetime income generally refer to fixed insurance products never securities or investments. Insurance guarantees are backed by the financial strength and claims paying ability of the issuing Carrier.

This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation. Mark Rowlette and Associates LLC DBA South Shore Retirement Services is not permitted to offer and no statement made during the show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the US government or any governmental agency. The Information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Mark rule at an Associates LLC DBA South Shore Retirement Services.

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1 Comment

  1. Aj Khan on August 2, 2023 at 6:16 pm

    Nice

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