With a wave of layoffs hitting both the private and public sectors (particularly in tech, the federal government, manufacturing and financial services) — coupled with the specter of future layoffs from tariffs — many professionals in their late 50s and early 60s are suddenly facing an unplanned financial crossroads.
According to the latest data from the Bureau of Labor Statistics, the unemployment rate stood at 4.2% in April, with 7.2 million people unemployed; 2 million filed unemployment insurance claims as of May 3, 2025.
As a financial advisor who has been helping clients and friends navigate these challenging times, I know how critical it is to be one of the first calls they make after a layoff. Moving quickly can help them avoid costly missteps, manage their cash flow, and lay the groundwork for a stable financial future.
Let’s look at some key steps you can take with your clients to assess their financial position, avoid common mistakes, and chart a new course forward, whether that means returning to work, shifting to part-time employment, or considering retirement earlier than planned.
Assess Immediate Cash Flow
When a client is laid off, the first priority is figuring out how they’ll pay the bills. Begin with a cash flow analysis to understand their income needs and available resources.
Help your client categorize monthly expenses into needs, wants and wishes. Needs include essentials like housing, food, debt payments and medication. Wants may include subscriptions, dining out and new clothes. Wishes might include travel or gift-giving. Eliminating or reducing wants and wishes can go a long way toward maintaining stability.
Also consider suggesting they switch from name brands to generic brands for groceries, toiletries, clothing, etc. Perhaps stopping discretionary savings such as to IRAs or investment accounts is also a good option. None of us like to turn off longer-term savings, but sometimes the immediate need supersedes the longer-term plan, which can always be adjusted.
Explore Income Options
If Social Security isn’t the right fit yet, explore other income streams. Are they eligible for unemployment benefits or local government assistance? Could they find part-time work, consulting roles, or gig opportunities? Reverse mortgages are also becoming more popular for older homeowners who have significant home equity but are in need of cash flow.
If your client still has leverage with their employer, help them negotiate a severance package. A client of mine secured a lump sum, continued paychecks, and health coverage for several months after their planned termination date. This financial cushion allowed them to maintain their lifestyle, including ongoing investment contributions.
Evaluate Assets and Emergency Reserves
Once you and your client have figured out the expense of their needs and assessed their income options, look at available resources to fill the income gap.
Start with emergency savings; ideally, your clients have saved six to 12 months’ worth of expenses. If that’s not enough, consider liquidating taxable accounts with minimal capital gains. In more serious cases, hardship withdrawals from retirement accounts may be necessary. Roth IRA contributions can be accessed without penalty. Although withdrawing from a traditional IRA before age 59½ comes with a 10% penalty, it may be an unavoidable last resort.
Avoid Common Financial Pitfalls
Layoffs can trigger emotional decisions that carry long-term financial consequences. As advisors, we must help clients to steer clear of preventable mistakes.
Understand Tax Implications
I once worked with a retired client who took a large distribution from their 401(k) to buy a house and two cars with cash. The client was hit with a massive tax bill, a higher tax bracket, and a 10% penalty because they were under 59½. Unfortunately, they ended up in debt with the IRS — proof that the desire to be “debt-free” can backfire if the tax consequences are not considered.
Social Security Decisions
Clients aged 62 or older may be tempted to start Social Security immediately, but this can reduce their benefits by up to 30% for life. Additionally, if they earn more than $23,400 annually (the 2025 limit), their benefits could be further reduced. Help clients understand the earnings test and remind them that they can withdraw their claim and repay benefits within 12 months if they return to work.
Plan for Underemployment
Some clients may find new jobs, but at a lower income. Support them in adjusting to this new financial reality.
Rework Daily Spending
Help clients re-evaluate their spending and focus on essentials. Small changes like cutting subscriptions or switching to generic prescription drugs can add up.
Reset Lifestyle Expectations
Talk honestly with clients about adjusting their lifestyle. Living within new, lower income levels doesn’t mean sacrificing all joy, but it does require being more intentional.
Continue Retirement Contributions
Even modest contributions to retirement accounts help prevent long-term setbacks. Encourage clients to keep investing when possible.
Manage Health Insurance and Benefits
Losing employer-sponsored health insurance is often one of the most stressful parts of a layoff.
COBRA Isn’t Always Best
While COBRA provides continuity, it’s often expensive. Compare it with Marketplace plans, especially if the client is relatively healthy and can tolerate higher deductibles in exchange for lower premiums.
Marketplace Coverage
Evaluate subsidies using estimated income, but be as accurate as possible. If your client underestimates their income, they may have to repay some or all of the tax credits when they file their taxes.
Medicare Planning
If clients are nearing 65, guide them through Medicare options and timelines. Insurance brokers (often paid by the insurers) can be valuable allies in choosing plans, and working with them doesn’t cost clients anything.
Reassess Retirement Timing
A layoff might accelerate or delay retirement plans. Help clients make realistic decisions based on their full financial picture.
Revisit Retirement Goals
Discuss whether clients can or want to retire now. Some stay employed for reasons beyond finances, including social connection, boredom, or avoiding private healthcare costs before Medicare eligibility.
Delay Retirement If Needed
Delaying retirement increases savings, reduces drawdown periods and boosts Social Security benefits. Consider showing clients projections to demonstrate the long-term impact.
Shift to Part-time Work
If full-time employment isn’t feasible, part-time work can provide structure and supplemental income.
Build a Sustainable Plan
Use financial planning tools to help clients visualize their new trajectory. Adjust assumptions and goals to create a realistic, empowering strategy for moving forward.
Conclusion
Layoffs are never easy, but with timely, thoughtful guidance, you can help your clients regain control and build a stable financial future. By reassessing budgets, identifying income sources, avoiding common mistakes, and re-evaluating long-term plans, you offer more than just advice — you provide reassurance during one of life’s most uncertain transitions. Whether your client is heading toward retirement or seeking their next job, your support can be the difference between surviving a layoff and emerging from it stronger.
Crystal Cox, CFP, CDFA, is an advisor with Wealthspire Advisors in its Madison, Wisc., office. She has been with the firm for almost a decade and part of the industry for nearly 14 years. Crystal is dedicated to building deep relationships and providing comprehensive wealth management, particularly for clients navigating life changes.
