Surviving Job Layoffs As A Boomer

Monday January 30, 2012 7:10pm

Man without money A layoff is hard on anyone, but perhaps even more so on a baby boomer who has performed the same job in the same industry for the past 20 years and yet still does not have enough savings to retire. Such a person often finds himself or herself feeling lost, maybe even panicky. Multiple questions arise about the necessity of withdrawing funds from a 401(k) or IRA and how to navigate the rough seas of re-employment in today’s job market.

Should You Withdraw From Your 401K or IRA?

Radon Stancil, a Certified Financial Planner™ and managing partner of Retirement Investment Strategies, advises, “If at all possible, avoid pulling funds from your 401(k) or IRA after you have been subjected to layoff. You will be faced with a substantial 10 percent tax penalty if you take money from a 401(k) or IRA, unless you are older than 59 1/2.”

During these tough economic times, however, plenty of people younger than 59 1/2 have had to withdraw funds from their retirement savings just to survive. “I advise these people to take as small a distribution as possible and try to live on their severance pay and/or unemployment compensation,” Stancil says. “Although it may take weeks or months to find another position, be open to the idea of working part-time or temporary jobs until permanent work can be found.”

Stancil provides an example: Suppose you have been laid off and you have $400,000 in an IRA, are not yet 59 1/2, and are reasonably certain that it will take you two years to find a position comparable to the one you just lost. Let’s say you need $30,000 to $50,000 a year to meet your living expenses. If all other options fail, allocate $60,000 to $100,000 from your IRA to cash, put it in an account where it can gain interest, and keep the remaining $300,000 fully invested.

The funds can be withdrawn on a monthly or yearly basis, according to Stancil. “Section 72(t) of the Internal Revenue Code allows taxpayers of any age to take a series of substantially equal periodic payments without a 10 percent penalty, provided that the payments continue for five years or until you reach 59 1/2, whichever period is longer,” he says. “While you are receiving the periodic payments, you cannot make any changes to the amounts.”

How To Sell Yourself in Today’s Job Market

Because withdrawing funds from retirement vehicles is a solution only in extreme situations, most laid-off boomers opt for finding a new position, even if it is a temporary one or a combination of part-time jobs.

David Rhode, CPA and managing partner at VACO Raleigh, LLC, has this advice: “The first place to sell yourself is to the people who know you, have worked with you and know your work ethic. They will be your easiest and most successful path to new employment.”

Rhode adds, “The second place to look for opportunities is with companies within any industries that you previously have experience. You will be attractive to potential employers because you know the industry, and if you stay within the same geographic market, you will bring value for knowing the history of that industry within the area. And the third place to consider, if you are financially secure and do not have to replace an existing salary, is the nonprofit sector, which pays less than the private sector but can provide substantially rewarding work.”

Boomers often find themselves overqualified for the jobs available and wonder how to let potential employers know they are interested anyway.

To do that, Sid Mitchener, who joined forces with Rhode in 2004 to co-establish VACO Raleigh, advises, “Get involved in networking to prove that you are dynamically able to solve the problem of being overqualified and are well-suited for the job. With face-to-face communication, you can show people that you have no ego, that you are eager to learn and very sincere.”

“If you were making $100,000 a year, for example, and were laid off, and you still need to make a similar salary to meet your financial obligations, then it’s not appropriate to claim you will be happy with a $80,000-a-year position,” says Rhode. “However, if you have achieved everything you have wanted in your career, and you are seeking more of a work-life balance and are not driven by financial obligations, you must ensure that the potential employer understands your personal circumstances or situation and believes you are sincere.”

The hiring manager has to buy the story, Rhode adds. “As a recruiter, I will ask people the same question in five or six different ways, just to make sure they are not trying to Man on cell phone manufacture an image. Make it crystal clear that you are excited and willing to learn the new role. You may have to take it on yourself to obtain training and perhaps re-tool to make yourself more marketable to today’s employer.”

What Industries are Hiring?

“From an industry vertical perspective, health care is hiring, especially in the area of electronic health care records,” says Mitchener. “Pharmaceuticals continue to hire, and technology companies are hiring, especially those that are cloud-based and software as a service (SaaS)-based. IT is still a hot skill set.”

A last piece of advice? “Get up to speed on social media,” says Rhode. “First of all, ensure you have some presence on social media, and second, audit that presence frequently.”

ABOUT RETIREMENT INVESTMENT STRATEGIES:

Retirement Investment Strategies is an independent, fee-based financial advisement firm that specializes in helping its clients plan for retirement, with an emphasis on 401(k)/ IRA management. For more information, visit http://www.financialplanstrategies.com/.

ABOUT VACO RALEIGH, LLC:

Vaco specializes in contract, special project and direct hire services in the fields of accounting and finance, information technology, eLearning and design, operations, and human resources as well as executive search. For more information, please call (919) 719-6500 or visit the website at http://www.vaco.com.