Nearly 3 million Americans filed for unemployment benefits in early May due to the coronavirus pandemic, the Department of Labor reported, bringing the two-month total to around 36.5 million unemployed.
While workers of all ages have been affected by layoffs and furloughs, older workers might be particularly vulnerable. And although job loss at any age can be devastating, losing your job later in life can potentially wreck your retirement plans. Here's what to do if it happens to you.
Millions of older Americans are out of work
The unemployment rate among workers age 55 and older has skyrocketed over a relatively short period of time, jumping from 3.3% in March to 13.6% in April, according to data from the Bureau of Labor Statistics.
Of all age groups, the 55-and-older crowd is one of the hardest hit when it comes to unemployment. Roughly 5 million people in this age group were unemployed in April, according to the Bureau of Labor Statistics, with most other age groups experiencing unemployment numbers of around 3 million to 4 million.
If you lose your job in your late 50s or early 60s, it could spell disaster for your retirement plans. Nobody knows exactly how long this pandemic will last, and with jobs scarce right now, there's no telling just how long it will be before you're able to find another job if you're laid off. This means you have a few options if you lose your job: try to hold out for another one, choose to retire early, or do both.
Weighing your retirement options
There is a chance the economy can bounce back within a couple of years, but whether that happens depends on how quickly the virus can be contained. If businesses are able to safely reopen, jobs might be plentiful in the near future. But there's a chance social distancing measures and stay-at-home orders could remain in place for a while.
If you have a healthy emergency fund, you might choose to live off those savings for as long as you can in hopes you'll be able to find another job soon. This way, you can avoid tapping your retirement savings, allowing your investments to continue to grow.
Not everyone can afford to live on their emergency savings for several months or years, however, so you might have no choice but to retire now and dip into your retirement fund. If you're at least 62 years old, you might also choose to start claiming Social Security benefits. Although your checks will be smaller if you claim benefits early, this income can make forced early retirement a little easier.
Keep in mind, too, that you can continue looking for work even after you retire. If you start working again after you've started claiming Social Security benefits, your monthly checks might be reduced if you haven't yet reached your full retirement age (FRA) -- which is either age 66, 67, or somewhere in between depending on the year you were born. These reductions are only temporary, though, and once you reach your FRA, your checks will be recalculated to account for the money that was withheld.
Which option you choose depends on your financial situation and the future of the economy. Having a strategy in place for how you'll handle a job loss can make these difficult times a little easier.