I was fired from my job just 1 year before I was set to retire at 70. What happens to my retirement plan now?

Moneywise

Wed, September 2, 2026 at 4:10 PM GMT+3 7 min read

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Most workers would feel good when they're just a year away from achieving a long-awaited goal like retirement. But with today's volatile job market, some people's careers are tripping at the finish line.

Take the case of Brian. He was fired at the age of 69, just one year before he was set to retire. According to a survey by the Transamerica Center for Retirement Studies [1], nearly six-in-10 retirees (58%) retired sooner than planned. Among this group, 43% cited employment reasons such as job loss (16%), organizational changes (16%), job unhappiness (14%) and retirement buyout (9%).

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Though he has ample savings, Brian is unsure what his termination means for his 401(k) and whether he should start collecting Social Security right away. Should he work with an employment lawyer to try to get a larger severance payout?

With so many questions, on top of the shock of being let go, his head is swimming.

Here's what he can do to sort out his surprise early retirement.

Brian's retirement savings

Luckily, Brian is in a decent place financially. Between his 401(k) and other investment accounts, he has a little over a million dollars saved.

Even then, he might be coming up a little short. Americans think they'll need $1.46 million to retire, according to Northwestern Mutual's 2026 Planning and Progress Study [2]. By contrast, Vanguard said in 2025 [3] the average retirement account balance for those 65 and older is just $299,442. That's only 24% of Northwestern Mutual's target figure.

If you find yourself facing a layoff, or are worried about being fired before retirement, you could consider working with a financial advisor to plan a budget for your new situation. Ensure that you can draw down your savings at a rate that balances having a comfortable yearly income with the knowledge that your funds will last as long as you need them to.

With Advisor.com, people seeking retirement advice can find a vetted financial advisor in minutes.

Simply answer a few quick questions about yourself and your finances, and Advisor.com will match you with a financial professional who can offer advice for your unique financial situation. From here, you can schedule an initial consultation for free with no obligation to hire.

Are you being treated fairly?

It's important to note that in at-will employment states, your employer can fire you for any (legal) reason at any time, even after you've announced your retirement. If Brian has any doubts about whether his termination was legal, he should speak to an employment lawyer who may be able to help him bring an action against his former company.

Illegal reasons for firing an employee include discrimination based on age and ethnicity, retaliating against employees for exercising their legal rights, whistleblowers reporting unsafe or illegal work practices, or because of an employee's medical condition.

While there are no state or federal laws making severance pay mandatory, it is usually customary for salaried employees. The payout may depend on your position and how long you've been at the company.

Whether you should negotiate for more also depends on your unique circumstances, and you should carefully read your severance agreement before you sign it. Also consider speaking to an expert.

What happens to your 401(k) and Social Security?

Your contributions to your 401(k) plan are yours, even if you are fired. Since Brian has been with his company for many years, he is likely fully vested in the program, and therefore also owns his full share of his employer's contributions.

"When you retire, you can leave your 401(k) in the current plan, roll it over into an IRA or take a lump sum distribution," explains BlackRock [4].

"Each option has benefits and drawbacks… Consider fees, investment options and liquidity needs. Understanding tax implications is crucial, and consulting a financial advisor can help you minimize your tax burden and comply with IRS rules."

Brian can apply for Social Security right away and receive more than his full retirement benefit amount since, at 69, he is older than his full retirement age. However, he would be able to maximize his monthly benefit by waiting until age 70 to claim Social Security.

Since Brian is close to retiring, he may elect not to apply for unemployment. However, he would be eligible provided his termination was without cause. He should be aware, however, that any severance he collects counts as income and may impact the payout he receives from the federal program.

Preparing for retirement

While Brian is losing out on his last year of savings before retirement, he can continue to build his portfolio even though he will be primarily spending rather than saving.

If you're in retirement, you may think that you are in spending mode rather than savings mode. However, with Acorns, you can continue building up your investments with every purchase.

The app automatically rounds up the price of each of your purchases to the nearest dollar and deposits the difference into a smart investment portfolio so that your spare change works harder for you. This can be a great way to continue saving even after you retire, and can transform your spare change into something longer lasting.

And the best part? If you set up a recurring monthly contribution Acorns can give you an extra $20 to get you started.

If you're in the pre-retirement stage, you may want to consider diversifying your portfolio outside of the stock market — especially if you've watched your investment balances yo-yo over the past year.

Alternative assets like real estate and gold remain popular as in-demand alternatives to the more traditional division of stocks and bonds. Both asset classes also tend to be somewhat shock-resistant, which means they can continue to perform even when market benchmarks like the S&P struggle.

Gold also ended August 2026 at over $4,400 per ounce [5]. A gold IRA allows you to take advantage of this hot commodity while giving you some market diversification.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

Deciding what to do next

Unfortunately, getting fired when you're close to retirement is fairly common. A study from ProPublica and the Urban Institute [6] found that 28% of stable, longtime employees sustain at least one damaging layoff by their employers between turning 50 and leaving work for retirement.

With a solid retirement fund in place, Brian can rest easy about his future financial security. If you are fired without a solid base of savings to rely on, be sure to speak to a financial advisor to help you understand your options for retirement or to plan how to return to work.