My Father is Losing His Job – Can He Afford to Retire or Should He Take a Pay Cut?

It’s an unfortunate truth that far too many people of baby boomer age and looking to stay in the workforce are being forced out. Whether this is a result of ageism is debatable, but there is no denying that the older you get, the more concern you will have about what to do about staying employed. 

In the case of one Redditor posting in r/personalfinance, he’s very worried about his 61-year-old father, who is days away from being eliminated from his job. The father had very little time to decide whether he would take a very large pay cut or a 10-week severance, leaving the original poster in a bind about how to help. 

Job Loss

This is an extremely unfortunate scenario where the father has been told his job is being eliminated. The son, the original poster, was understandably surprised by the announcement and felt awful about the father’s situation. It’s horrible for a company, any company, to give such a limited set of options to someone who has given who knows how many years of employment. 

Choosing between a “massive pay cut” and a 10-week severance doesn’t really give the father any good moves to make. Even with the father turning 62 in a month and being eligible for Social Security, the Redditor’s diabetic and 59-year-old mother still have to be factored in. 

From what it sounds like, the father has a current household income of $75,000, so any pay cut is likely to deeply affect their standard of living. Even with $850,000 in the bank and being debt-free, it still creates a scenario of what to do next. The good news is that because the father turns 62 in a month, there is the potential of a $2,100 Social Security payment. 

Still, the Redditor is trying to choose the best option available to recommend to his father, and even the best option isn’t great. So, what should this Redditor do? 

How To Help

It’s clear as day that the Redditor is going to go to great lengths to help his father, so he should do a few things first. 

Gather Every Document

The first step is to gather every available financial document and get an absolutely clear sense of where things stand. This includes looking at recent pay stubs, 401(k) documents, anything related to a pension (it doesn’t sound like there is one), and anything else that might be available from the mother as well. 

Contact A Financial Planner

Once all the documents are gathered, the next best step is to contact a financial planner and get an appointment immediately. No matter which decision the father makes, it would be in everyone’s best interest to sit down with a fiduciary and understand exactly what different scenarios look like for both retirement and continuing to work. 

Compare and Contrast

As soon as the meeting with the financial planner is over and the family is armed with additional details, it will be necessary to compare and contrast the severance versus the reduced salary. The 10-week severance helps get them over the hump until Social Security becomes an option, but taking SS at 62 means a 30% drop from what the father might get if he can hold out until he turns 67. This also has to be factored in as part of the decision process. 

Healthcare Considerations

While the Redditor’s father is in good health, they really need to think about how to help the mother, who regularly sees doctors for her various medical conditions. As they are still a few years away from Medicare, taking the severance package means that COBRA might be an option, so it’s important to know how affordable (or unaffordable) this would be until the father decides to leave the job. The same goes for shopping around the ACA marketplace and knowing what the cost would be there. 

Delaying Retirement

Whether or not the father leaves the job and looks for another one or stays at the job with lower pay, there has to be a conversation about delaying retirement to maximize Social Security benefits. At this point, it’s hard to say if the father can retire, as this is really a question for the financial advisor who can provide a more concrete answer based on living expenses and any other financial commitments in the parents’ lives.

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