Millions of Americans have been laid off as one the ripples of COVID-19, and the numbers have all but crawled to improvement. March 2020 struck a very harsh cord for many working Americans. With the mixture of the novel coronavirus and stay at home orders, businesses felt a struggle they could have never predicted. For the majority of people, working brings purpose to the day and puts food on the table. While not every occupation might be our favorite, there is still pride in earning a living. When that is taken away, due to any circumstance, it’s distressing. As of August 2020, unemployment fell to 8.4% percent according to the U.S. Bureau of Labor Statistics. These numbers mean millions of American’s are stepping back into the workforce, but doesn’t reflect full recovery to working citizens.
Navigating unemployment is stressful, overwhelming, and requires an active plan. If you have been laid off, there are key concepts to keep in mind. Knowing the details of your severance plans and rights are imperative for financial security. In addition, keeping a sound budget for the coming months is also recommended. If you’re saving for retirement, or approaching your retirement years, and you’re in shock by a recent lay off, we have provided suggestions to help keep your finances in order.
Your Unemployment Check List
- Severance Package
- Insurance changes
- File for Unemployment
- Make a realistic budget
There are a number of ways you can create a smooth transition into your next job, or even retirement. For starters, address your severance package to ensure your employer has abided by what is entitled to you. The U.S. Department of Labor states there is no requirement for severance pay, however, many employers still offer one regardless. A severance package could include a certain dollar amount depending on the length of time you have worked with the company, as well as various other benefits, including insurance. Not every package is the same, but it’s better to be offered one nonetheless.
Review all your insurance companies. If you spent hours commuting to work in a personal car, unemployment will likely leave you driving less until you have found new work again. Don’t hesitate to call your insurance company and make changes to your assumed mileage on your contract. This could ultimately save you money if you know you will be unemployed for a longer period of time. Additionally, if you were insured through your employer, you may need to review alternate options for health insurance.
Next, consider filing for unemployment. Without receiving additional income, you can go through savings faster than you realized or anticipated. While interviewing for other jobs, you will be able to stay afloat through unemployment allowances.
Lastly, work to create a realistic budget. If you are in a pinch, consider making room solely for necessities in your budget. Groceries, gas, bills, medications, home or auto repairs; those all fall under this category. Of course, necessities depend on the person. So we recommend you make your list clear and try to stick to it as much as you can.
Review Your Retirement Plan if You have been laid off
You have been laid off, but have a company-sponsored retirement plan? You can roll it over into a new portfolio or plan. There are options provided for individual plans, and each option is accompanied with its own rules and stipulations. You have agency over your retirement plan and its proficiency, and the results of its optimization depends on your choice of portfolio and actions taken therein. If you are offered a job with a new company sooner than you expected, you may also simply transfer your 401(k) plan to that company, as well.
Upon unemployment or employment you have the option to restructure your portfolio to have it match your risk level for the next chapter of your life. You have the ability to make your risk level conservative or more aggressive depending on your circumstances. It all depends on your preferences and the financial goals you would like to meet.
Lastly, it’s recommended to try to not cut into your 401(k) plan if you don’t have to. Taking money out of your 401(k) could lead to greater financial consequences than you may be willing to deal with. Whether you have a traditional IRA or Roth IRA account, you will be penalized if you withdraw funds from your account before you have reached the age of 59 ½. While it is an option, it should be a last resort on your unemployment checklist.