How to Survive Financially after a Job Loss

Call it what you want—laid off, downsized or early retirement. Losing your job is stressful and I believe it is imperative that, should you join the ranks of the unemployed, you stay calm and avoid making hasty financial decisions.

Below are some items to keep in mind:

 

 

Try to negotiate a severance package – This may include lump sum or weekly severance pay, health insurance benefits, stock options, pension benefits and references.

If able continue company benefits like health, life and disability insurance. Be sure to keep your insurance in-force and don’t let your coverage lapse.

Review income and expenses – In addition to filing for unemployment, if you are 62 or older consider taking social security benefits. Talk to creditors about reducing, deferring or stretching out payments. Consider a home equity loan to pay off credit cards since the rates may be lower and the interest is usually tax deductible.

If you are younger than 59 ½ try to avoid making withdrawals from IRA’s, 401(k)’s and other qualified pension plans unless it is absolutely necessary. When you consider retirement may last 20 or 30 years, pulling out tax-deferred funds to cover today’s expenses is shortsighted and should be your last alternative. If, however, you must access this money prior to age 59 ½ get educated on "IRS Section 72t Distribution" and learn how to avoid the 10% premature penalty.

Rollover your 401(k) or defined contribution pension plan to an IRA. This will prevent taxation and allow for the potential of continued tax deferred earnings. Compare the benefits of a Roth vs Traditional IRA.

 

 

It is recommended that you speak with a financial representative or tax accountant to help you avoid costly mistakes.