Layoffs & the Economic Backdrop

By: Loreal Loftus

Recent headlines show that layoffs are mounting. large companies across sectors are cutting jobs as operational costs, restructuring and shifts in demand bite. At the same time:

• There’s a growing phenomenon of “forgotten” retirement accounts: small 401(k) balances that are left behind when people change jobs through layoffs or restructuring.
• When someone faces job loss, their financial vulnerability spikes — liquidity matters, choices about retirement accounts matter.
• On the positive side, contribution limits for 2026 are being raised for 401(k)s and IRAs — giving greater tax-advantaged capacity.

For the real-estate investor community (like our network at MnREIA): this situation has multiple dimensions:

• On one hand, more layoffs → more motivated sellers (people with changed income, job uncertainty), which may create property acquisition opportunities.
• On the other hand, economic uncertainty means investors must safeguard financial flexibility — including via retirement accounts.
• Using 401(k)s/IRAs strategically (for yourself or via certain vehicles) might give you an edge in real estate deals — but only if done carefully.

Why retirement accounts matter right now

Here are several key reasons why your 401(k)s, IRAs and retirement-saving posture merit extra attention in the current environment:

1. Job change risk = account fragmentation

When someone is laid off or changes jobs involuntarily, there’s a real risk of leaving behind a 401(k) or otherwise not rolling over, which leads to higher fees, lower performance or lost opportunity. For example:

“Forgotten 401(k)s hit record $2.1 trillion … nearly 32 million accounts left behind as of July 2025.”
This means if you (or someone in our investor network) face job loss or business income volatility, you want to proactively manage these accounts — not let them drift.

2. Liquidity & access considerations

When income is disrupted (layoff, commission drop, deal flow slowdown) you’ll want to know your options:

• Do you have emergency savings aside from retirement accounts? (Yes = better.)
• Do you understand what you can/should not tap into retirement accounts too early (to avoid penalties/taxes)?
• Do you know how retirement accounts can be repositioned to support real-estate investing (or at least not held hostage by inactivity)?

3. Tax-advantaged “room” is increasing

For savers and investors, the 2026 increases in contribution limits create opportunities:

• 401(k) employee contribution limit rises; catch-up contributions increase.
• IRAs also get higher limits.
  This means that, if you foresaw or foresee a period of higher taxable income (or want to optimize tax structure before you ramp up property acquisitions or business earnings), you might use this “room” to maximize before large-scale deals.

4. Retirement accounts + real estate strategy

As a real estate investor, your retirement account strategy can link to your property investment plan. Some possibilities:

• Use a self-directed IRA (or rollover IRA) to invest in real estate (subject to rules).
• Use your retirement contributions/benefits to free up cash flow for property investing (rather than tapping into debt/traditional savings).
• In a downturn or layoffs environment: preserving retirement savings (rather than cashing out) allows you to keep compounding and remain viable for the long term, while your deal-flow profits may accelerate.

Action Items:

1. Audit your retirement accounts now

• Check all 401(k) / IRAs you (personally) hold: balances, fees, performance, and account owner service.
• For any old employer 401(k)s (especially if a job change or layoff happened), ensure you know where they are, whether they were auto rolled to a “Safe Harbour IRA” or similar (which may have higher fees and be lower growth).
• Consider consolidating; roll old 401(k) into a single IRA or active plan where you have control and avoid lost/forgotten funds.

1. Update your strategy considering layoffs/uncertainty

• For any investor who experiences an income drop (deal slowdown or job change), advise them not to panic and withdraw retirement funds unless necessary — penalties/taxes may hit hard.
• Build liquidity buffers outside of retirement: before pushing hard on acquisitions, ensure you have 3-6 months (or more) of operating buffer so you can weather deal lags.
• Use a template checklist (job change, income drop, property expense variability) that ties retirement-account review to property-investment readiness.

1. Leverage retirement accounts in property investing (where appropriate)

• Consider using a self-directed IRA or Rollover as Business Startup IRAs (ROBS) only after full due diligence and tax advice. These can allow retirement funds to flow into real estate or business ventures, but many pitfalls exist.
• Converting part of the capital that might otherwise be locked up elsewhere. I would suggest speaking with a qualified financial planner.
• Emphasize “tax seatbelt” strategies: maximizing retirement contributions now (given the 2026 limits rising) means you reduce current taxable income, preserve long-term compounding, and have optionality for real-estate deal flows.

“If layoffs happen, do you know where your 401(k) is?”

“Have you rolled your old employer plan? Many small balances are being left behind.”

“Before you deploy new capital into deals, know how your retirement account situation affects your risk profile.”

“Higher contribution limits in 2026 mean you can build the tax-advantaged portion of your wealth faster — and that supports your real-estate goals.”

I would encourage you to reach out to Dave Ehrenkrook, Lead Financial Advisor, and a valued MnREIA Vendor, so he can help you assess your personal situation and offer the very best solutions to you.