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All Contents © 2019The Kiplinger Washington Editors
By Eileen Ambrose, Senior Editor
Kimberly Lankford, Contributing Editor
| February 1, 2018From Kiplinger's Personal Finance
Even the best-laid plans for retirement can suddenly go awry if a major life event strikes. For example, a sudden job loss, a marital break-up or becoming a caregiver for an ailing parent or spouse can wreak havoc on finances – potentially for years. But even if you’re hit with one of these life events, you can get your retirement back on track.
Here are three major retirement derailers, as well as resources and strategies to overcome them.
Older workers have one of the lowest unemployment rates of any sector of the workforce—3.3% or less, as of December. But once they lose a job, it takes them longer than younger job seekers to find a new one. On average, 25- to 44-year-olds land a new job in just over five months, but it takes two to five months longer for older workers, depending on their age, reports the Bureau of Labor Statistics.
How to get back on track. Reconnect with old contacts from college or previous jobs to let them know you’re newly unemployed. “Everybody finds jobs through networking,” says Lori B. Rassas, an employment attorney and author of Over the Hill But Not the Cliff.
Ageism is a reality for older job seekers, Rassas says. But rather than hide your age by eliminating all dates on your résumé, try to work around the stereotypes of older workers. “No one cares that you’re 60,” Rassas says. “It’s not the age. It’s what it represents.” Employers often assume older workers have low energy and are inflexible, uncomfortable with technology and just biding their time until retirement.
To overcome these views, show that you are still learning and on the cutting edge of your field by attending conferences, serving on panels at seminars or writing articles, she says. Post your profile on the business networking site LinkedIn. If you don’t have a LinkedIn profile, employers may assume you lack the technology skills to keep up, Rassas says.
Apply to smaller companies that get fewer résumés than larger employers do, Rassas says. You may have to accept less pay, but don’t offer to take a large pay cut right off the bat—you may sound desperate and turn off an employer, she says.
Once you find a job, develop a side hustle in a related field that brings in money and broadens your network. If you’re laid off again, the side gig may become your main employment—or at least provide income while you search for other work, Rassas says.
The divorce rate for those age 50 and older has doubled since the 1990s. In 2015, 10 out of every 1,000 married persons divorced, and the number of so-called “gray divorces” was even higher among those in remarriages, according to the Pew Research Center. Divorce can upend retirements. “You are now maintaining two households with the same amount of assets you spent a lifetime building. It can be devastating,” says Haleh Moddasser, author of Gray Divorce, Silver Linings: A Woman’s Guide to Divorce After 50.
How to get back on track. For couples splitting up, Moddasser suggests “collaborative divorce,” in which spouses and their lawyers meet with the goal of creating a win-win situation for both partners.
Or, if you’re already divorced, the new tax law may make it worthwhile for you and an ex to renegotiate the settlement. Starting with settlements reached in 2019, alimony payments will no longer be tax-deductible, and alimony income won’t be taxed. It’s possible, Moddasser says, for an ex to pay less in alimony while the recipient still comes out ahead because payments won’t be reduced by taxes.
You may be eligible to receive Social Security benefits based on an ex’s work record if the amount will be larger than you’d get on your earnings history. You must be single, you and your ex have to be at least 62, and the marriage must have lasted 10 or more years, says Mary Beth Franklin, a CFP and contributing editor at InvestmentNews. This chance for a bigger benefit is one reason Franklin advises married couples near the 10-year mark to wait to divorce. “If your marriage is on shaky ground in years eight or nine, stretch out the paperwork,” she says. “Because if you are married, literally, nine years, 11 months and 29 days, and you get divorced, you’re out of luck.”
Caregivers who look after a parent or relative often jeopardize their financial security, over the short and long term. If they reduce their work hours, they may no longer be able to contribute to an employer retirement plan, meaning they don’t get the company match. If they’re forced to quit altogether, they may have a tough time finding a job when they’re ready to return to work.
Merrill Lynch and Age Wave, a consulting firm that studies aging issues, surveyed more than 2,200 unpaid caregivers and found that 24% said they had trouble paying their bills, 21% dipped into savings and 18% couldn’t contribute to other expenses or savings—which can have a long-term impact on their own plans. “Caregiving is a hidden threat to retirement security,” says Catherine Collinson, of the Transamerica Center for Retirement Studies. “We talk about market fluctuations, but caregiving is just as risky a proposition.”
Marie Johnson Bosscawen, 55, is trying to get her retirement plans back on track after moving her ailing parents from Ohio in 2015 to be near her in North Carolina. “It became so much to manage. I ended up quitting my job,” says Bosscawen. She stopped saving for retirement, and her husband reduced his 401(k) contributions to increase his take-home pay. Since then, Bosscawen’s mother has died, and her father, who has dementia, has moved from her home to a senior facility. Bosscawen has a new job as a safety specialist that pays more than the her old job, and she socks away money in her 401(k) and IRA. Her husband has boosted his contributions, too. They sold their 4,000-square-foot house to buy one that’s about half the size with a smaller mortgage that they hope to pay off in 10 years, when either one or both of them can retire, she says.
How to get back on track. Resources available in your area may help you provide care while you keep your job. Your local Area Agency on Aging has information about home-care agencies, senior centers, transportation and other services (see the Eldercare Locator at Eldercare.gov.
Some employers offer resources for caregivers. Fabiola Brumley, 54, a Bank of America executive in Florida, had to find care for her mother, who suffered a stroke. Brumley joined a caregivers group at work and discovered that the bank offered a free meeting with a geriatric care manager each year. She also signed up for backup care, another employee benefit, which provides emergency care for $6 per hour if Brumley or her mother’s caregiver isn’t available.
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