Job losses continue for middle-aged workers who have put in many years with their employer and had planned to stay until retirement. The loss of savings caused by the big drop in stock prices during 2008 only adds to the stress felt by people now losing their jobs. There is a small silver lining, though.
Many laid-off workers receive severance packages including several months’ pay as well as a payout of the accrued value in their pension plans. They need some of this money to live on while searching for a new job, but a big chunk of this money can often be saved for retirement.
All this means that laid-off workers find themselves suddenly with a pile of cash to invest in some way. The currently low stock market prices make an interesting place to invest this money. There is no guarantee in the stock market just as there are no guarantees in life, but lower prices increase the chance of good returns in the future.
It would be interesting to know what choices laid-off workers are making when it comes to investing their newly-found retirement money. Some possibilities include leaving it in the company pension plan, buying an annuity, and investing it in some combination of stocks and bonds.
My choice for money I won’t need for 3 years is to put it 100% into stocks. This option is all the more attractive with today’s low stock prices, but may be a difficult choice for someone who has just lost his job and is feeling very insecure.
For those who have the courage to take advantage of fire-sale prices in stocks, I hope that future returns prove to be a silver lining slightly offsetting the painful life disruption of job loss.
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