Hi All,
The New York Times is calling American’s current economic conditions a full blown depression. With the economy melting down, some of you may be wondering what to do if your job is in jeopardy or you’re currently in job transition.
1) Before the Layoff:
Assume your income will drop. Even with unemployment payments, gifts or other kinds of supplemental income, you’ll probably face reduced bucks coming in. Consider cutting back on your budget to compensate. For example, when Miel had her most recent spell of job loss, we cut out some of our luxury food, charitable donations and eating out. If you’re looking at a spell of unemployment, don’t be afraid to thoroughly evaluate your budget.
2) Leaving:
There are several things things that you’ll probable deal with if you leave your employer.
A) Miscellaneous Benefits: If you have any of these, find out when your life, disability and health insurance benefits expire. If you have any unused sick or vacation time be sure you calculate it and get credited before you leave. Similarly, if are lucky enough to get stock options, you’ll want to be sure you find out when these are vested. It often pays to follow up on these BEFORE you leave, afterwords its harder to get peoples attention.
B) Health Insurance: In 1986 Congress passed the COBRA Act which said that employers with 20 or more people had to offer health insurance coverage for their departing employees. Most of the time this coverage period is 18 months. The catch is that even though they are offering coverage, after you leave, you’ll have to pay the full tab. It might be worth your time to look into this.
C) Managing your 401(k) balance:
Regarding 401ks and 403bs, you’ve got 4 options. They are:
1) Rollover To Your New Employer
2) Rollover To An IRA
3) Leave In Your Former Employers Plan
4) Take A Cash Distribution
One way to determine which option us best is by evaluating the performance of the securities held in your account. If your mutual funds are doing poorly you might want to roll them over. Generally speaking, your worst option is to take a cash distribution. You’ll be liable for taxes on the withdrawal and there are additional penalties. Schwab.com has a pretty good write up if you want more info.
3) Post Separation From Employment:
When you do decide to get back on the job market, you should keep in mind that many of your expenses may be tax deductible. Stuff like resume preparation costs, phone, fax, and travel can all be written off. There are some restrictions on this. For example, first time job seekers can’t take the deductions and you have to be looking for a job in the same field.
Looking for work doesn’t solve the immediate problem of reduced income. While its never really a good idea to balance multiple projects you could also consider taking on some free lance work in addition to your job search. If you’ve got marketable skills, you might consider something like elance.com or you can always try to pick up some extra money. This could allow you to bring in some cash so you don’t have to use all your wealth on basic necessities during your time of unemployment.
Finally, if you’re married, remember a job loss is stressful on both partners. You’ll likely go much further towards getting reemployed if you both find ways to motivate and nurture each other rather than fighting or backbiting.
Best,
James
