Times have been hard for many people since the economic problems that started in 2008. Many who were laid off still have not been able to find good paying jobs, and financial problems have resulted in 35 percent of laid off workers dipping into their retirement savings, says Christine Dugas at USAToday.
Being laid off can be difficult in itself, but trying to find another job when jobs are hard to find only makes it even more difficult. A report by the Government Accountability Office (GAO) found that many people over 55 who were unemployed had difficulty finding a new job in less than six months.
Having lost their jobs, many of these laid off workers went on to experience being unable to make mortgage payments, and then they needed to get money from wherever they could find it. As a last resort, as many as a third of them tapped into their retirement savings and some have completely exhausted these funds, too.
Retirement savings can be rather easily depleted when you withdraw money from them prematurely. If you are using an IRA or a 401(k) as the vehicle for your retirement plan, you will incur taxes and penalty fees when you withdraw money, too, which will eat your savings up even faster. By way of example, the same USAToday article mentions that if you took out a loan of $6,542 from your retirement plan and defaulted to pay it back over 60 days, it could cost you a total of $9,934.
While younger people still have time to replace money in their retirement accounts, those who are older do not. Being that it is taking them longer to find a job, and due to their age, many of them will not be able to replace their retirement savings. Most likely, this means that they will have to keep on working the rest of their life.
One of the fastest ways to build – or rebuild – a retirement fund is to work where the employer is willing to make matching contributions. This takes some of the pressure off of the employee to try and come up with the same amount of money on their own.
In order to preserve as much of your retirement money as possible, if this situation applies to you, is to do all you can to raise your income. There are many options here, and this may include taking on a second job, going back to school to get re-trained, moving to a less expensive location, or even starting your own business. If you still have not yet found suitable work, be willing to take work wherever you can find it – this is better than nothing, and remember that many employers now won’t hire someone who is not currently working somewhere.
Get back to putting money into some kind of pension plan as soon as possible. One benefit of an IRA or 401(k), according to the Department of Labor, is that it is tax deductible. You can also put up to $5,000 per year into it, or more if you are older than 50. If you should try investing, and are over 50, you do not want to use risky investments because you do not have time to recover money lost in this way.