I turned 62 right when the first Covid shutdowns were happening, and guess what I got as a birthday present: a layoff.
I worked for my company for more than 10 years and planned to stay until retiring. I thought that wouldn’t happen for another four or five years. I’ve been collecting unemployment and applying for jobs. But the jobs haven’t materialized, and I know the unemployment will eventually come to an end.
I’m fed up. I’m considering throwing in the towel, retiring and collecting Social Security.
My retirement savings in my 401(k) and Roth IRA are modest. I was counting on having a few more years of letting that money compound. I’m divorced. There’s no one else’s income to fall back on. I could make things work with my retirement savings and Social Security, but things would be tight.
Should I start collecting Social Security now or hope for a miracle in this terrible job market?
-Ready to Retire Already
You’ve been job hunting for four months in a pandemic. Your retirement plans have been interrupted. Like millions of Americans, you’re stressed about the $600-a-week federal unemployment bonus nearing its expiration.
You’re understandably exhausted. You’re looking at two big decisions right now: taking Social Security early and leaving the workforce early.
Retiring now presents a double whammy. By taking Social Security now instead of at full retirement age, you’d reduce your monthly benefit by 30% for life. Plus, as you point out, you’d miss out on several extra years to contribute to your retirement and watch that money compound.
Yet I can’t tell you to focus on the impact of this decision 10 or 20 years from now if you don’t know how you’ll pay next month’s bills.
Life-altering decisions are best avoided when you’re under extreme duress. So what I want is to buy you more time, rather than telling you whether you should take Social Security.
The first thing I want you to do here is exhaust every dollar of unemployment benefits you can. There’s a good chance that the extra $600 federal unemployment payment will be extended for a lesser amount in the next stimulus bill. If your state benefits are expiring, you’ll also probably qualify for a 13-week extension of that not-so-generous benefit through the CARES Act.
The ideal scenario is that you can survive the short term through a combination of unemployment, cash savings and extreme budgeting.
But in the more realistic scenario that this isn’t possible? You have my blessing to withdraw what you need to survive the next few months from your retirement account.
I’d suggest taking a coronavirus-related withdrawal under the CARES Act retirement rules, even though early withdrawal penalties aren’t a concern since you’re over 59 ½. The advantage of doing so is that you’d be able to repay your plan over the next three years should you go back to work.
The best option is to withdraw from your Roth IRA, since you probably won’t be able to put money back into your 401(k) once you no longer work for the sponsoring employer.
Since it doesn’t sound like you wanted to retire early before the crisis hit, I don’t want you to abandon your job hunt just yet — but I don’t want it to dominate your life, either.
We often tell someone who’s newly laid off that finding work is their new full-time job. But even during good times, job hunts usually involve a lot of rejection. Applying for jobs 40 hours a week is a recipe for burnout in an abysmal hiring market, especially given the frequent age discrimination older applicants experience.
Can you block off a certain amount of time each weekday — a couple hours max — with the goal of accomplishing one thing in your job search? It could be applying for a job or a smaller task, like reconnecting with a former colleague about opportunities or updating your LinkedIn.
Anything you can do to stay connected to the workforce and maintain a routine will be helpful. But signing off from job searching after you’ve accomplished what you’ve set out to do each day will preserve your sanity.
Remember: You have a stable work history. Your skills didn’t suddenly lose their value when the pandemic arrived. Focus on keeping your options open for now, knowing that these awful times will eventually pass.
Robin Hartill is a certified financial planner and a senior editor at Codetic. Send your tricky money questions to [email protected]