If you are laid off after working many years, you might think about retiring instead of looking for another job. Before you announce to your friends and former co-workers that you are removing yourself from the employed, ask yourself certain questions.

        First, make sure you can afford to stop working.

        The 2008 Replacement Ratio Study, conducted by Chicago-based Aon Consulting and Georgia State University, indicates that although people who no longer work have fewer expenses such as commuting, Social Security taxes and income taxes, the former worker must replace a percentage of their past annual salary in order to maintain his or her standard of living. Most of this replacement will come from your savings and retirement accounts, so you have to calculate whether you saved enough.

        Here’s an example from the study: A worker who earned $50,000 at retirement will need to replace 81 percent of that amount annually to continue the same standard of living. Each year in the future, the worker may receive 51 percent ($25,500) from Social Security, while the remaining 30 percent ($15,000) needs to come from an employer retirement plan and/or the worker’s own savings. A worker who earned more would have to have saved more.
        Don’t forget about health care coverage, says Bradford E. Klinck, senior vice president of retirement at Aon Consulting.

        “Under the assumption that the retiree has it covered with COBRA and then Medicare without a break, or employer-provided coverage to age 65 and then Medicare, makes it much easier to retire early,” Klinck says.

        If you don’t have enough money to retire, consider going back to work.

        “Continuing to work means that they continue to save, don’t draw down their current assets and have less years to draw down those assets in retirement,” he says.

        Also, chances are the value of your investments might have decreased during the economic downturn.

        “Working even one extra year will increase the Social Security benefits a person earns for life and will put him or her one year closer to earning Medicare if not already age 65 or older,” says Kim Rivera Beattie, president and owner of the management consulting firm Catapult People Solutions, LLC in Atlanta.

        Consider also the emotional side of retiring.

        “Golfing every day might sound great, but many people find that, when the average person works roughly 11,000 days between the ages of 21 to 65, that’s a lot of golf to play and a lot of money spent to do so,” she says.

        You might decide you want to work part time or become a consultant.

        “There are many smaller restaurant concepts who may not be able to afford to employ someone with the experience level a veteran in the business can offer, but would love to have the support and expertise they could bring to something like opening new restaurants,” Rivera Beattie says.

        No matter what you decide, make sure you apply for unemployment benefits when you get laid off. Network to let people know you what you are doing.

        “If the decision is to retire, there’s nothing wrong with letting people know but they should consider keeping in contact with their network so that if they change their mind at some point, that network is still there and may be able to help,” she says.

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