No Longer Young, and Now Laid Off: 5 Ways to Protect Your Finances

Nearly 900,000 private sector employees have lost their jobs so far this year, more than the number laid off through all of 2024.

The federal government recently estimated it would end the year with 300,000 fewer workers.

Many of these people are late-career employees and not willing or financially able to retire.

Yet finding a new job after age 50 can take months, especially as the labor market tightens. Employers added a mere 22,000 jobs in August, according to the Bureau of Labor Statistics, fewer than what economists expected. The unemployment rate also rose to 4.3 percent, up from 4.1 percent in June.

Here are five ways to secure your finances while you search for a new job.

1. Manage any severance package carefully.

If you’re lucky enough to receive a severance package, experts agree it’s important to treat it as an asset, not as a windfall.

2. Avoid taking money from your 401(k).

When employees leave their jobs, one-third withdraw their 401(k) balance as a cash sum, according to recent Vanguard report, despite cash-outs often resulting in withdrawal penalties.

3. Keep an eye on your tax bracket.

If you have taxable investments and your income drops substantially because you’re not working, consider liquidating some holdings.

An asset such as a stock, bond or mutual fund held for longer than a year is subject to a long-term capital gains tax. The rates are 0 percent, 15 percent or 20 percent, depending on your income — a higher income results in a higher tax rate.

4. Don’t forget about health insurance, unemployment and creditors.

If you’re laid off, you’re eligible to apply for state unemployment benefits and to enroll in an Affordable Care Act, or A.C.A., health insurance plan.

Apply for unemployment benefits in the state where you worked, not the state where you live, according to the Department of Labor.

5. Don’t fret about pausing saving for retirement.

Financial experts agree that it’s OK to stop putting money into a retirement savings account while you’re unemployed, because it’s more important to focus on paying your bills and finding a stable job.