# March, 26, 2020

Laid Off Before Retirement? What to Do Next

If you’re over 50, chances are high that you’ll be laid off before retirement at least once. A 15-year study found that 56 percent of workers reported being laid off one or more times after turning 50 – even those in long-term employment.

We’re still in the early weeks, but the coronavirus pandemic has already led to thousands of people being laid off. This post offers tangible steps you can take to protect both your financial and physical health if you lose your job.

Apply for Unemployment

After an involuntary termination, the first thing you should do is apply for unemployment. For many, the maximum unemployment benefit is only a fraction of their previous salary. But you’re entitle to these funds, which can help cover vital living expenses.

If, upon termination, your employer paid out vacation accruals or severance packages, you may have to wait before collecting unemployment benefits.

Apply for Medicare if You’re Over 65

If you’re over 65 and delayed Medicare enrollment because you had group coverage through an employer (yours or your spouse’s), it’s time to stop delaying.

It’s true that you have 8 months to sign up for Medicare after losing creditable coverage. However, it’s also true that federal regulations stipulate that Medicare is the primary payer for patients over age 65 who don’t have creditable coverage. And very few types of insurance count as “creditable coverage” once you turn 65 and qualify for Medicare.

For example, COBRA only has to pay after Medicare pays its share. This can happen even if you don’t yet have Medicare, leaving you responsible for 80 percent of your healthcare costs. And if you just lost your job, the last thing you need is unexpected medical expenses.

Please see our post, How Do You Apply for Medicare, for detailed instructions.

Review your personal budget if laid off before retirement

Review Your Budget

Even if you have liquid savings or received a severance package, it’s always a good idea to review your budget after a layoff. Many monthly expenses, like rent or mortgage payments, can’t be reduced quickly. But you can curtail discretionary spending, such as eating out and entertainment, while you adjust to being unemployed.

Decide Whether to Apply for Social Security

If you’re over age 62, you can take early retirement through Social Security. However, just because you can doesn’t mean that you should.

Retiring early reduces your monthly benefit for the rest of your life. The amount varies according to the year you were born. For example, people born in 1958 will turn 62 this year (2020). If they choose to retire, their Social Security benefit is reduced by 28.33 percent, or $28.33 for every $100. Of course, you will also collect your benefit for longer than if you’d waited (which is why it’s lower). The right choice depends on your unique situation.

If you’re closer to full retirement age, your monthly benefit doesn’t take as big of a hit. Full retirement age varies according to the year you were born.

  • People born between 1943 and 1954 reach full retirement age at 66
  • Add two months for each year between 1954 and 1960 (e.g. 1955 retirement age is 66 and 2 months, 1956 is 66 and 4 months, and so on)
  • Everyone born after 1960 reaches full retirement at age 67

Delaying retirement increases your monthly benefit by 8 percent for every year you delay. However, this does not continue indefinitely. You reach your maximum benefit once you turn 70.

Create a my Social Security account to see estimates of your projected monthly benefit, including if you choose to retire early. In addition, our post, Planning for Retirement, explains qualifications for Social Security, how to apply for Medicare, and more.

Different types of retirement savings accounts

Review Your Liquid and Retirement Savings

Just as you take a financial hit for retiring too early, you could also face penalties for drawing funds from a retirement account, such as a 401(k) or IRA. If you’re younger than 59-1/2, you face a 10 percent early withdrawal penalty as well as taxes.

You may be able to continue housing your 401(k) with your former employer. Requirements vary, but mostly come down to the account balance. Minimum balance requirements typically range between $1,000 and $5,000. Another option is to roll your 401(k) into an IRA. If you have multiple 401(k) accounts with different employers, it may be a good idea to roll them into a single IRA. This could lower the account management fees you pay.

To understand your options, it’s a good idea to talk to an accountant or financial advisor.

Consider Your Options

Did you plan to make major changes after retirement, such as relocating or launching a new business or second career? Now may be the perfect time. And downsizing earlier than you’d intended may allow you to delay retirement and maximize your Social Security benefit.

A financial advisor or accountant could also help you discover significant tax savings that make early retirement possible – even without applying for Social Security. Financial planning could also help lower your premiums for Medicare Part B and Part D.

Compare Your Medicare Plan Options

Our online Find a Plan tool makes it easy to compare your Medicare options. It’s free and easy to use. Just enter your location and estimated start date to start comparing Medicare Advantage and Part D prescription drug plans in your area.


Chris Gasparini

Chris Gasparini has been a licensed insurance agent since 2005. He enjoys helping Medicare beneficiaries navigate their options to find the best solution for their unique needs. Chris feels as though his work truly helps people. Because he represents multiple insurance companies and plan types, Chris is able to help Medicare beneficiaries find the best, most cost-effective plan. Every day, he leaves work knowing he did what was right for each and every client he serves.

The MedicareUSA website is operated by HealthPlanOne, LLC a licensed health insurance agency based in Connecticut; in California d/b/a HPOne Insurance Agency, license #OF30784. HealthPlanOne, is a licensed and certified representative of Medicare Advantage HMO, PPO and PPFS organizations and stand-alone prescription drug plans with a Medicare contract. Enrollment in any plan depends on contract renewal.

For a complete list of available plans please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult www.medicare.gov.

The purpose of this communication is the solicitation of insurance. Contact will be made by an insurance agent/producer or insurance company.

Medicare supplement plans are not connected with or endorsed by the U.S. Government or the federal Medicare program.

The Centers for Medicare and Medicaid Services (CMS) does not review or approve Medicare Supplement plan information.

Other Pharmacies are available in the plans' networks.

Last Updated 12/21/2018