Starting Over Financially After Bankruptcy, Divorce, or Unemployment

Mature woman looking sadly out a window.

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It's never easy to start over, at any age, but many have done remarkable things when forced to start from scratch. You just never know—it could be the best thing that ever happened to you.

There are many reasons why people aged 55 or older must start over, including bankruptcy, divorce, and unemployment. Regardless of the reason, here’s how to forge ahead.

Key Takeaways

  • The first steps are to find work, cut down on your regular expenses, and build an emergency fund so you can maintain a healthy budget.
  • Next, focus on investments by using any employer match in a 401(k), contributing to a Roth IRA, or buying a home.
  • Lastly, consider your plan for collecting Social Security; if you wait until you're 70, you'll get far more income than if you collect earlier.

Find Work, Then Find Work You Love

Your first priority will be finding work; your next priority will be finding work you love. That is far more important than you might think. Starting over means working longer, but when you find work you love, you never work a day in your life. Think about what you are doing when you get so caught up that you lose track of time. Find work that uses those same skills. If you love what you do, you may be able to work longer without feeling drained.

Tighten Up Expenses

Learn how to live happily on less and keep your required expenses down. You'll need to save as much as you can, as quickly as possible. Get the economy car, locate lower-cost living options, and find other areas of your finances that can be reduced, such as cutting down on underutilized subscription services and choosing to cook at home instead of eating out.

Build Your Emergency Fund

Don’t rush to invest. Build up a savings account that has at least three to six months of living expenses in it. Establishing a savings account is one of the most important things you can do when starting over, and it shouldn't be treated as optional. Skip the extras, and instead find joy in watching that account balance grow.

Use Your Employer Match

If your employer offers a retirement plan and matching contributions, take advantage of it. For example, if you put in 3% of your pay, some employers will match that, bringing the total contribution to 6%. That means you will have instantly doubled your input, so be sure to contribute enough to get the match.


Not contributing the most that your employer will match is leaving free money on the table.

Consider a Roth IRA

One type of account that can double as a retirement account and an emergency fund is a Roth IRA. Unlike retirement accounts such as a 401(k), you can always withdraw your original contributions from a Roth IRA without taxes or a penalty. Funds that you leave in the Roth IRA grow tax-free, but withdrawing your earnings (not contributions) can result in taxes owed and a 10% penalty on the withdrawn amount. If you are using your Roth IRA as an emergency fund, put at least six months of living expenses into safe investment choices, such as a money market fund.

Avoid Big Investment Risks

It can be tempting to take risks with your investment decisions in the hopes that higher returns will make up for lost time, but that is not smart. Slow and steady is the way to go. Learn how to measure investment risk, then choose investments accordingly. Be sure to stay far away from get-rich-quick schemes or investments that seem risky.

Consider Buying a House

Buying a house can protect you from rising rents, but it also comes with maintenance and upkeep costs. If you buy, keep your mortgage payment affordable, leaving you enough money left over to continue saving and cover ongoing upkeep costs.

Use a home warranty policy to protect against expensive repairs. It is also beneficial to look for a place that is energy-efficient and requires little lawn maintenance. If you look for a patio home or condo, be aware of association fees that could go up, and of assessments for public shared areas.

Don't Take Social Security Early

Social Security provides inflation-adjusted lifelong income. If you wait until you are 70 to begin your benefits, you'll get far more income than if you collect earlier. That is part of the reason why finding work that you love is so important. When starting over at 55, you need to plan on waiting until 70 to begin your benefits. If you're married (or were married for at least 10 years), you may be able to collect on an ex-spouse's benefit record. Be sure to look into all of your options before you start taking benefits.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Wells Fargo. "Saving for an Emergency."

  2. H&R Block. "Traditional & Roth IRAs: Withdrawal Rules and Early Withdrawal Penalties."

  3. IRS. "Topic No. 557 Additional Tax on Early Distributions From Traditional and Roth IRAs."

  4. Social Security Administration. "Benefits for Your Divorced Spouse."

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