I was laid off at 58 years old, I have substantial debt and a high mortgage payment, and my severance package will only cover these expenses for seven months; what should I do in addition to looking for a new job?
What you have done in the past is done. There is nothing you can do about it. Going forward, take any legitimate job and start making some money; become extremely frugal; avoid further debt and do not touch your 401(k) unless you must.
Yes, do not stress. I know that will be hard to do, but you do have assets that far out way your student loan and credit card debt. You are getting close to retirment, so as a last resort you may tap these assets. Let's try not to rely upon the reitrement assets until retirement. One key piece of information is missing and that is the wifes income.
Course of Action:
- Write down a budget withonly one income, not including your severence. See if you can weather the storm with no IRA/401k Distributions. Get lean and mean.
- Make Minimum Payments on debt.
- Notify credit card company of circumstances to see if they can cut your interest rate or help with a temporary repayment plan.
- Don't be afraid to defer a couple of car payments. I believe it can only be done once, so take the most upfront. You can always make the payments as though you didn't defer. (shouldn't be a hit on your credit score)
- Don't make any major purchase's (I know, common sense. However, people do like to wish in one hand...)
- Call your Mortgage company to see what can be done short of refinancing (possible deferral)
- If you can hold off until 59 1/2 ,you will not have the early distribution penalty for withdrawing from your IRA. Given your circumstance, it could be considered a hardship, but you would need to get with your tax advisor for consulting.
- Relax, do some volunteer work to meet new people.
Sorry to read about your current difficult situation. I know it can be a scary and uncertain time.
My first piece of advice would be to reduce your expenses as much as you can during this time of transition. I would continue to make your debt payments, but do not pay any extra. Cash is king in your current situation! Your first goal should be to stretch the available cash (severance) as long as possible until you start working again.
If your new job starts and still have severance cash available (or they are still paying you if the severance is collected over time), I'd recommend using the excess cash or cash flow to: (1) build an emergency fund (if you don't have one already) and then (2) eliminate some of your debts. Specifically, the credit card debt, student loans and car obligations should be eliminated. Don't spend those extra funds on new consumption; use them to change your long-term financial health by eliminating debt.
Please don't touch the retirement accounts unless you absolutely have to. If necessary, hopefully you'll be 59.5 years old so you won't also owe a 10% penalty. Using those funds early will severely undermine your retirement income later in life.
Best of luck to you! I hope a job opens up soon!
I think the key is what not to do. I would not touch any o fyour IRA's or 401(k)'s. Not that you are close to the point of "bankruptcy" but these assets would be protected if you need to go down that path. Besides that you are doing the most important thing which is networking and trying to find new employment. I would also freshen up on your states unemployment policies to see when and if you'll be entitled to unemployment benefits. Some States would require after unemployment payments, some start now, and some you wouldn't be eligible if certain situations. Naturally the other thing I would do is slim down expenses as best you can to the bare minimum until you've secured new employment. Good sites for looking for a job are indeed, linkedin these days, and depending on the level you were I've had lots of clients find success using a recruiter. Best of luck and let me know if any other questions or can help in any way.
Sorry to hear you are going through a tough time. If it is any consolation- there are many people of your age, in your situation. More and more people are working longer and postponing their retirement especially if they have been laid off at some point in their career.
In addition to looking for a new job you may want to see if you can do some part-time work to supplement your income until then. You don't mention if your wife works or is interested in working- if she is not working currently, maybe she can also look for a part-time or full-time work. You will of course have to start living frugally and paying off your debts when possible. Credit cards usually have very high interest rates. You may want to see if there is any way you can reduce your interest rate, for example by balance transfer to a card or a loan that has better terms. Try not to touch your retirement account- you will need that when you retire.
Another thing: It is commendable that you put your daughter through school, hopefully she knows about your sacrifices- so that she works as hard as possible at school and after graduating.