So your near-retiree client got laid off. What now?

So far, 2025 hasn't exactly been a good year for the American worker.

The latest US jobs report gave investors something to feel good about, with employers adding an unexpected 177,000 jobs in April according to the Bureau of Labor Statistics.

Still, other data points are raising alarm bells. A Reuters report earlier this month counted 602,493 layoffs announced by employers so far for the year, marking the highest pace of people being cut loose since 2020. That was also up 87 percent from the same period in 2024, when just 322,043 layoffs were announced.

With headlines of downsizing and workforce reductions coming from all angles, including Wall Street firms, large broker-dealers, and even the federal government, it appears more and more clients are going through life after layoff – and according to Crystal Cox, senior vice president at Wealthspire Advisors, it's not an easy transition.

"Obviously, nobody plans for it," Cox recently told InvestmentNews. "Hopefully, if things go well, you can get right back on course, but there usually is some level of shifting gears to a different type of plan or course of action."

"Pre-retirees are a big, big part of our business model, just because those are the people that need that longer-term planning."

Cox shared recent conversations she had with three people in her immediate circle, including two clients and a family friend, who all called soon after they were unexpectedly laid off. Apart from their age and career stage, she explained how different aspects of their financial situation came into play as they looked at different options.

"The family friend was 63, and one of my clients was in her late 50s and extremely employable," she said. "The other client was a woman in her early 60s who was employable, but wasn't sure if she'd find another job at that same pay grade."

One of the first orders of business, Cox said, was to assess someone's budget for excess expenses to cut in the short term. At this point, she says it's important to be ruthless, with lifestyle items like shopping, trips to the salon, golf, and subscription services potentially going on the chopping block.

Other decisions aren't so straightforward. "The woman in her early 60s that was laid off was making monthly contributions into her husband's Roth IRA," Cox says. "They were maxing out those contributions, which totalled more than $500 a month. ... They still had a mortgage and other financial obligations ove the short term, so we had to pause those."

While Cox's family friend was the happiest to retire, she found he was also the least financially prepared for it. After going over his situation, they discussed several possible next steps including downsizing his home and moving to a lower-cost area. 

From a cash flow standpoint, he got some breathing room by finding part-time work. He also chose to start drawing from Social Security earlier than his full retirement age, which Cox says isn't ideal.

"In most cases, the full Social Security retirement age is 67 but you have the option to claim it as early as 62," she says. "But you can be penalized from a tax standpoint for claiming Social Security before your full retirement age, sometimes significantly."

Cox says many near-retirees immediately panic and tap their Social Security after a layoff, not realizing the consequences. But by paying back those redemptions within the first year, she says it's still possible to avoid those tax penalties.

"My other client, the one in her late 50s, negotiated an incredible severance package from her previous employers. That included a lump sum and being paid for a couple months, even after she was laid off," Cox says.

The bottom line, Cox says, is that every situation is different. While some may be able to balance out their expenses and income by adjusting their spending plans and finding alternative income options – going through part-time work, for example, or drawing from their portfolios – that may not be as feasible for people sandwiched between two generations of dependents. To help clients through the decision, Cox says advisors at Wealthspire use financial planning software, running Monte Carlo analyses to build financial plans for the long term.

"We run through these different adjustments to a person's retirement age, budget, Social Security plan, and other variables, and make sure our clients stay within a certain likelihood of having a comfortable retirement," she says. "What will work for you? What are you willing to do? What choices aren't you willing to make? And from there we can work out what to do next."