Layoff at 52 Sparks Concerns Over Retirement Savings and Future

A 52-year-old Canadian, identified as Ryan L., faces uncertainty after being laid off due to his company’s closure. With less than $250,000 saved in registered retirement savings plans (RRSPs) and no company pension, Ryan is grappling with the reality of retirement in a challenging job market.

Ryan reached out for guidance regarding his financial future. After starting to save for retirement later than many, he expressed concerns about how his current situation will affect his retirement plans. Financial expert Allan Norman, a certified financial planner, offered insights tailored to Ryan’s circumstances while emphasizing the importance of maintaining a positive outlook.

Understanding the Financial Landscape

At 52, Ryan’s savings are not insignificant. Allan Norman highlighted the “rule of 72,” a method to estimate how long it will take for an investment to double based on its interest rate. Assuming a 7 percent annual return, Ryan could potentially reach $500,000 in his RRSPs by age 65, a solid base for retirement when combined with the Canada Pension Plan (CPP) and Old Age Security (OAS).

Norman advised Ryan to focus on preserving his savings during unemployment. He suggested managing current finances carefully, particularly during the transition between jobs. This includes reducing spending and considering a tax-free savings account (TFSA) for emergencies.

Navigating Employment Insurance and Severance

Ryan’s next steps will play a crucial role in his financial stability. Although he has not confirmed a severance payment, it is likely he will receive one. Norman recommended applying for Employment Insurance (EI) benefits immediately after being laid off, even if payments are delayed until the severance period ends. This proactive approach helps mitigate income gaps that could lead to drawing from his RRSPs prematurely.

Both severance and EI are taxable incomes, and Ryan will need to prepare for potential tax implications in the upcoming year. Norman encouraged Ryan to estimate his income for 2025, considering the mix of employment income, severance, and EI, and to use tax calculators for accurate predictions.

Norman cautioned against withdrawing from RRSPs to contribute to a TFSA, as Ryan’s current situation may still yield a reasonable income. Instead, he emphasized the value of maintaining contributions to the CPP, which provides a guaranteed indexed pension in retirement, easing financial worries.

As Ryan navigates this period of transition, Norman reminded him of the importance of securing employment before age 58 to retain CPP disability insurance coverage. Given the complexities of retirement planning, Ryan’s situation serves as a reminder of the importance of early financial preparation and adaptability in an unpredictable job market.

In closing, Allan Norman expressed his hope that Ryan finds new opportunities swiftly, offering reassurance in uncertain times. As a certified financial planner with Aquarius Financial Inc. and an investment advisor with Aligned Capital Partners Inc., Norman provides valuable insights to those facing similar financial challenges. For further assistance, Ryan can reach out to him directly at [email protected].