A sudden job change can bring about a fair amount of panic and uncertainty. So while you are updating your resume, we’ve put together a few things you should consider if you have an unexpected job change that might help you feel better about your short term financial situation.
· Check your life insurance beneficiaries. When you leave your employer, you may lose your life insurance coverage. We suggest having at least some outside coverage that will always come with you. Make sure you call your former employer’s HR department and see how long your coverage lasts.
· Check on cobra health insurance coverage. When does your current coverage run out? Make sure to contact your former HR department to see what your options are. You’ll get a packet containing all the info in the mail, but it doesn’t hurt to get a jump on the info. If your employer was subsidizing your health insurance premiums each month, be prepared for a shock when your get your first COBRA bill. It might be a good time to start shopping for some temporary basic coverage as well.
· Solidify your short term savings. If you have a savings account, make sure it is liquid and not invested. You might find a new job pretty quickly, but it’s a good idea to have a few months of savings to make sure you can take care of your family. You don’t want your short term funds invested in anything that might lose value in the short run. It’s also a good idea to prioritize your expenses and maybe put the club membership on hold.
· File for unemployment. Even if you have the next job already lined up, you don’t know how long it might take to land your next opportunity. You want to go ahead and take care of the paperwork sooner rather than later, as it can take several weeks for benefits to start.
· What about my 401k? This is not as urgent as the above. You have a few options on this one, including rolling into your new plan at your next job or rolling it over to a traditional IRA. If you think you might be out of work for an extended period of time and might run through your short term savings, you might want to roll into a traditional IRA so you have easier access to it. However, we always stress that using retirement funds as a short term cash flow solution should be a last resort (consider taxes and possibly locking in losses if the market were to drop and you had to sell).
You should compare your current and prospective account’s features, including investment options and services, fees and expenses, withdrawal options and required distributions, legal protections, and tax treatment before making a transfer decision. Any withdrawals may be subject to income taxes and, prior to age 59 1/2, a 10% federal penalty tax may apply.
If you’ve been laid off and need help getting your financial plan in order, fill out the form on the right and let us know how we can help.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor intended as tax advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.