Out of work and under 65? Here’s how to retool your retirement plan

We reached a milestone last week when the government reported that the U.S. economy has regained all the jobs lost during the Great Recession. Yet for many older workers the recession never ended; long-term joblessness has morphed into de facto premature retirement. Now, millions are performing financial triage on retirement plans that had been based on assumptions of working longer.

The overall job market does look promising, and on the surface, the outlook for older workers doesn’t look bad. The jobless rate for workers over 55 was 4.7 percent last month, well below the national rate of 6.7 percent. But older workers who lose their jobs still face a much longer search for work; the average duration of unemployment was 49.4 weeks in March, compared with 36.2 weeks for all workers. And the number of unemployed people over 55 rose more than any other age group during the recession, according to an AARP analysis – 1.5 million in January this year compared with 832,000 in 2007.

Nothing hits a retirement plan harder than job loss in the last years of work. These are the years of peak earnings and – one hopes – peak contributions to retirement accounts. Repairing a retirement plan is difficult for premature retirees, but there are ways to mitigate the damage. Here’s what to consider if you find yourself among the involuntarily retired.

Also see the RetirementRevised.com guide to unplanned early retirement.