Although pundits continue to argue about whether the economy has slipped into a recession (technically defined as six consecutive months of negative growth), there is no doubt that even highly compensated people are hurting. To anyone who has been unceremoniously dumped from a high-paying job in finance or real estate, it certainly feels like a recession, despite the tame 5% unemployment rate reported by the Labor Department as recently as April.

The tough thing for your clients—who are probably in their peak-earning fifties and sixties and enjoying the pride in accomplishment that comes with those fat paychecks—is that they may be particularly vulnerable. Although they may feel youthful and fit, these clients are considered mature (a nicer term than old, but no less dismissive) in the workplace. "When the economy is soft, as it is now, you're going to have an increase in layoffs among mature workers," says Deborah Russell, head of the AARP's Workforce program.

What's more, it's often more difficult for older workers to find new jobs. According to researchers Sewin Chan of New York University and Ann Huff Stevens of University of California, Davis, four years after a job loss at age 55, the employment rate for laid-off workers was 20 percentage points below that of non-laid-off workers of the same age. In fact, workers 45 and older make up 14% of the labor force, yet they account for 37% of the long-term unemployed, people who have been out of work for at least 27 weeks, according to Chan and Huff Stevens.

These midlife workers may need you to be a coach as well as a planner. It's a shock to one's self-confidence to be laid off at any age, and to be thrown into the job market in midlife is dispiriting. You may have to convince clients to stay in the workforce and run the scenarios that prove your case. In today's uncertain environment, financial advisors need to know if their client's job is in jeopardy and to brainstorm about Plans B, C and possibly D.

Double Whammy 

A layoff close to retirement can wreak havoc on a well-laid financial plan. It disrupts the ability to accrue Social Security and pension credits, which tend to accumulate fastest near retirement, while also forcing people to dip into their savings. "This is the point in life when pre-retirees tend to stockpile money," says Mary Fay, senior vice president and general manager for SunLife Financial's annuities division in Wellesley, Mass.

"The kids are out of the house, and the parents are saving a lot. So a layoff is a double whammy: Your earnings are shot, and you lose the opportunity to accumulate," she adds.

According to a 2006 SunLife survey, 22% of retirees were forced into retirement an average of eight years earlier than they had anticipated because of a job loss or health problem. That can require a financial downshift.

"The toughest thing is if you've been planning your retirement based on a certain salary level," says Joel L. Naroff, president of Holland, Pa.-based Naroff Economic Advisors and chief economist for Commerce Bank. "When you get laid off, there's a significant chance that you won't get a job at that same level again."

Mike Haubrich, president of registered investment advisory firm Financial Service Group in Racine, Ill., uses this rule of thumb to explain to older clients how long it might take to land a new job: "For every $10,000 a year a person earns, you'll need a month to find a job when unemployed." The choice often comes down to two alternatives: early retirement or a lower- paying position.

Keep Working

If asked, most advisors say that they advise their newly jobless clients against taking early retirement. "It is unlikely they will have enough saved to support the lifestyle they want in retirement," says Christine Fahlund, senior financial planner with T. Rowe Price in Baltimore. A nest egg accumulated over 30 years probably isn't ample enough to support someone for the next 30, 40—or even 50 years.

Chances are, however, that an executive or middle manager won't find a job that pays nearly as much as the previous one did. "I wouldn't call middle management a growth sector," Naroff says. "If you're losing your job as a middle manager, other companies are probably making similar moves."

In fact, researchers Chan and Huff Stevens report that half of workers 55 and older who are laid off see their wages reduced by 19%, on average, in their next job; almost a quarter of the people in this age range find jobs paying less than half of what they were earning before. Now there's a confidence-builder. "They're also more vulnerable to being laid off again since they don't have tenure at the new place of employment," says Alicia Munnell, director of the Center for Retirement Research at Boston College.