RIF'd at age 55

RIF'd at 55
By: Beverly Terrill (c)

I have long teased my husband that I was going to retire at 55.  Before that, I said I was going to retire as soon as my kids were on out of the house. In other words, sometime in the future and when I felt ready.  Fate intervened and now at 55 years old, my position has been eliminated.  I have been with the company for 30 years with officially 28 years of service. It wasn’t just me. I was in a wave of about 70 employees.   Now what?

Let’s back up a few years, my husband is self-employed and I have worked for the same company since we met. When we married, we owned a home and our cars. No monthly payments.  I made decent money and carried the health insurance. My husband made very good money. Then came the crash of 2008. The business my husband had built from scratch was now showing half the profit we netted prior to 08. However, I was moving up the ladder in my company so still no worries about money. Keep in mind we are very frugal. We drive cars that are at least 8 years old and only buy new appliances when the old one dies.

I had many different jobs during my tenure and one in particular was brutal. I worked long hours, traveled and often worked holidays. I began to dream of being retired. At this time I was only 52. My company had a 401k plan and I had been contributing 6% because that was how much my company matched.  However, if I wanted to retire with any type of income, I needed to put more into my 401K. I bumped it up to the annual maximum allowed pre-tax.  Luckily, I did this for 2 years before my unexpected layoff. Also, several years before this, my company implemented an HSA plan so I maxed it out as well.

Fast forward to today. What are my options as a 54 year old?  There are more options than you might think that will allow me to begin to draw from my 401K and my small pension my company also provides.  So what can I do today?
  • Draw from 401K plan – Whoa! Don’t you have to be 59 ½ to avoid the penalty?  Nope. If you leave your job during or after the year you turn 55 (50 for certain government agencies), you are allowed lump sum distributions out of your company retirement plan penalty free.  It is still taxed however based on your current tax rate in the year you withdraw.
  • Take my pension distribution either in a lump sum or monthly distributions. We are talking about a plan with less than 100K. This is taxable but there is no type of penalty.
  • Live off my savings account which is about 4 years at our current household spend

But before I decide to forget ever working for corporate America again, let’s look at all options. I am ONLY 54! I plan to live at least 30 more years.

So the first thing my husband and I determined was the value of the pension and 401K if I wait until at least 65. Medicare will kick in at that time as well.  In addition, we will both have access to our Social Security whenever we decide the time is right to begin drawing from that pool. Bottom line is that all forms of retirement assets will remain as such.

The focus now becomes on what I can do for the next 10 years to create income.  Once my job ends, I will have health insurance though very costly for 18 months. This is known as COBRA coverage. Essentially, you are now paying the employer and employee cost of you health insurance. 18 months is the federal law that the employer does not control. I could use my HSA savings to pay the premiums for those 18 months. I mention health insurance because we know that if we do not have at least some type of catastrophic coverage, our savings can be wiped out with a major health issue.

Let’s look at the timeline for my next 10 years:
  • 6 months severance so I could do nothing for the first 6 months – it’s appealing to take the summer off and golf
  • 18 months insurance coverage which means I can be self-employed and/or work with my husband. I could also work with an outside consulting firm. But eventually, I will need a job that offers me affordable insurance or a business that makes so much money; I don’t need to worry about a health disaster.
  • For the next 8 and half years I just need to make enough money that I can hold onto not only my retirement but my savings as well.

Follow me on my journey as I navigate the path to retirement. I can’t wait to see what happens next!!!

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