Retirement Retirement Planning

7 Steps to Take If You're Laid Off Within 5 Years of Retirement

Practical moves to stay financially secure when a job loss happens close to retirement.

By Adam Palasciano

Edited by Andrea Basse

Updated Dec. 15, 2025

Losing your job when you are only a few years away from retirement can feel overwhelming, especially when you are trying to avoid money mistakes this late in your career. Your income may suddenly stop, yet major decisions about Social Security, healthcare, and savings remain on your plate. This transition can be emotionally draining, but it is also a moment to make strategic choices that safeguard your financial future. With the right plan, you can stay on track even when the unexpected happens.

Here are seven steps to help you navigate this period with confidence.

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Reduce your spending

A layoff close to retirement is a signal to tighten your budget and slow down discretionary spending. Cutting back can help preserve your emergency fund and may reduce the need to withdraw from retirement accounts early. Review your recurring expenses, subscriptions, and lifestyle habits to identify quick savings opportunities.

Scaling back now creates more financial flexibility while you determine your next move. At the same time, even just a temporary spending freeze in certain categories can also help you better understand your true baseline expenses going into retirement.

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Consider your income options

If you are at least 59½, you begin to tap your 401(k) and IRA without penalty, though taxes may still apply depending on the type of account. Alternatively, a part-time role, consulting work, or short-term contract job can help bridge the gap while preserving your long-term savings — even modest supplemental income can delay larger financial decisions until the job market improves.

Be sure to also explore unemployment benefits, severance pay, or any company-sponsored support programs available to you.

Decide when to start collecting Social Security benefits

You can start collecting benefits at age 62, but doing so results in a permanent reduction of around 30% compared to waiting until your full retirement age (FRA) of 67. Waiting even longer — up to age 70 — can increase your monthly benefit by roughly 24% (or 8% per year), offering a guaranteed return the longer you delay.

Evaluate your savings, health, and income needs before locking in a decision. A well-timed claim can significantly influence your long-term retirement security. Also, running multiple claiming scenarios through the SSA's online tools can highlight how different timelines may affect your projected lifetime income.

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Lean on your professional network

Reaching out to former colleagues, mentors, and industry peers can uncover opportunities you may not find on job boards. A brief message explaining your situation could open new doors faster than you expect. Networking can also provide emotional support during a vulnerable transition period.

Staying visible in your industry — even through casual conversations — can help remind others of your expertise and availability. If you don't have one already, make sure to create a LinkedIn profile and include all of your work history and professional experience.

Rethink your interview strategy

If you begin interviewing again, avoid relying solely on past experiences — employers want to hear fresh ideas, adaptability, and enthusiasm. Be ready to demonstrate how your skills remain relevant in a changing workplace. Updating your résumé and practicing modern interviewing techniques can help you stand out.

Be sure to show your confidence and flexibility to counteract age-related hiring biases. Researching each company's current challenges can help you tailor your responses and position yourself as a forward-thinking candidate.

Consider whether to actively seek new employment or simply retire early

Some workers choose to formally retire, especially if they have sufficient savings and no desire to return to full-time work. Others prefer to keep working in some capacity to maintain financial stability or personal fulfillment. Weigh the costs of early withdrawals, healthcare coverage, and your long-term retirement income before making a decision. Clarity on your financial needs will help you choose the path that aligns with your goals.

Mapping out several retirement timelines can also make it easier to see how each option affects your savings longevity and lifestyle.

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Enjoy the downtime

After the initial shock of job loss, a little rest can help you regain perspective. Retirees may look back and appreciate the extra time they had to reconnect with hobbies, family, and personal interests. Taking a breather before your next step can reduce stress and support healthier decision-making. This pause may also help you enter retirement — or your next job — with renewed energy.

Use this period to reassess your priorities and clarify what you truly want your next chapter to look like.

Bottom line

Losing your job close to retirement can feel destabilizing, but thoughtful planning can protect your savings and long-term financial health. By reevaluating your spending, income options, and Social Security timing, you can create a path that keeps your goals within reach.

A layoff does not have to derail your retirement — in many cases, it can lead to a more intentional plan that supports a stress-free retirement and helps you move forward with confidence.

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