SURVIVING A LAYOFF IN UNPRECEDENTED TIMES
By Jeremy Gove
If you have been laid off, you’re not alone. This year has been one for the record books. The American Economy was shut down almost overnight because of fear and panic related to COVID-19. The week ending March 28, 2020, a record-breaking 6.6 million Americans applied for unemployment benefits caused by the virtual shutdown of our nation. Worse yet, this was the second consecutive week of record-setting unemployment claims. (Carmen, 2020) Before that, the record was just under 700,000 claims filed in a single week in October 1982. (Cox, 2020)
The unexpected stress of dealing with a layoff combined with the issues of COVID-19 may have you feeling overwhelmed. Much of the anxiety stems from unknown or undetermined variables. The good news is that there are steps you can take to help you survive and set yourself up for future successes.
TAKE ONE STEP AT A TIME
Do not make rash decisions. Leave your job gracefully and with respect for your employer. Everyone is dealing with the shock of these unprecedented times. Your employer could not have foreseen COVID-19 coming, and no business is immune to its effects. Your old boss can be a valuable resource when you are looking for a new job.
DETERMINE YOUR LIVING EXPENSES
Tough times require us to make difficult decisions. Stress and anxiety decrease when you have accurate and timely information so you can make educated decisions. Knowing what your expenses are will help you determine how much income you need each month to survive. Now you can decide whether you need to find a temporary job while you search for employment in the field you are qualified for.
TAKE AN INVENTORY OF YOUR RESOURCES
Create an inventory of the assets you have available that can help you meet your monthly financial obligations. Include things like savings, CDs, checking, 401(k), and any other investment accounts.
Keep in mind that through the CARES Act economic relief plan, you can withdraw up to $100,000 out of an IRA or workplace retirement plan in 2020. Usually, such a withdrawal before turning 59 ½ would carry a 10% penalty for early withdrawal. However, the CARES Act has removed that penalty if you, a spouse or a dependent, tested positive for COVID-19 or experienced negative economic consequences related to the pandemic. (Cares Act Update: More Investors Qualify for Relief, 2020)
UNDERSTAND HOW UNEMPLOYMENT BENEFITS WORK
Unemployment benefits may be available to you if you lose your job through no fault of your own such as being laid off. The amount and duration of unemployment payments vary from state to state. On average, unemployment benefits replace about 40% to 45% of your weekly income. The maximum number of weeks you can receive benefits can range from 12 weeks to 26 weeks. (FileUnemployment.org, 2020)
WHAT ARE YOUR HEALTH INSURANCE OPTIONS
When you lose your job, your health insurance benefits are probably gone as well. You may be eligible for COBRA benefits. COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act, which provides eligible employees and their dependents the option of continued health insurance coverage following the loss of a job. COBRA extends coverage for a limited time, ranging from 18 months to 36 months, depending on circumstances. COBRA may not be the best option because the cost can be high.
The CARES Act also provides a health insurance option by opening a “special enrollment” period for the federal health care exchange website (www.healthcare.gov). Act quickly because the window is only open for 60 days following the loss of your job. Other forms of health insurance may provide you a more affordable option than COBRA.
We see people in the office every week who want to retire but need to keep medical coverage, so they keep working until they are 65. Health insurance can be expensive when filling in the gap until you reach age 65 when you are eligible for Medicare.
If you are in your 60s, now is an excellent time to get an update from the Social Security Administration about your potential benefits. Most people begin taking Social Security at age 62, which is often the wrong decision. The difference between taking benefits at 62 and 66 or 67 depending on when you were born can be substantial. If you wait until age 70 from 66, it can add 32% to your monthly income. Comprehensive planning can help you make an efficient overall decision.
If you have a pension available to you in the future but have are not old enough to start it now, a lump sum distribution may be the way to go. Figure out when you can start your pension and the income that it will provide. You could roll over your pension funds as a lump sum now through an IRA rollover. Instead of waiting a few years until your pension income can start, the lump sum would give you access to those funds now, helping you out in the short term. At the same time, you take appropriate steps to get back on your feet. Again, comprehensive planning can help you determine the best course of action. Obtaining a professional opinion on this matter is highly recommended.
LEARN FROM THE PAST
When you took inventory of assets you have, did you uncover things that you could sell? For example, do you have an extra vehicle or stuff in storage that could bring in some cash to help you pay down debts you have? Once you can get back on your feet, set up an emergency fund or replenish the one you had to tap into during this difficult time. Strive to pay down debt. Unfortunately, there will be more difficult times ahead. Hopefully, not this severe, but you never know. A good financial plan will help you pay down debt, save for emergencies, and save for your retirement.
DO YOU WANT TO GO BACK TO WORK?
We have had many meetings with clients who believe they must work for several more years when in actuality, they could retire now if they choose to. Many people who are capable of retiring do not believe they can because they have not created a plan.
SEEK PROFESSIONAL HELP
You can survive a layoff. It requires some planning and perspective. Putting all the pieces together in a financial plan can be very freeing. You may realize that you do not have to go back to a stressful job with long hours if you do not want to.
Do not wait. Seek professional help from a financial advisor who can help you create a written income strategy to determine how far off you are from retirement. It might be closer than you think!
Cares Act Update: More Investors Qualify for Relief. (2020, June 26). Retrieved August 27, 2020, from Vanguard: https://investornews.vanguard/what-the-cares-act-means-for-you/
Carmen, R. (2020, April 2). US jobless claims skyrocket to 6.6 million, doubling last week’s record, as coronavirus layoffs persist. Retrieved August 27, 2020, from Business Insider: https://www.businessinsider.com/us-weekly-jobless-claims-unemployment-filings-record-labor-market-coronavirus-2020-4
Cox, J. (2020, March 26). Jobless claims soar past 3 million to record high. Retrieved August 27, 2020, from https://www.cnbc.com/2020/03/26/weekly-jobless-claims.html
FileUnemployment.org. (2020, August 4). Unemployment Benefits Comparison by State. Retrieved August 27, 2020, from FileUnemployment.org: https://fileunemployment.org/unemployment-benefits/unemployment-benefits-comparison-by-state/
Investment Advisory Services offered through Retirement Wealth Advisors, Inc. (RWA), an SEC Registered Investment Advisor. Stonebridge Insurance and Wealth Management and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
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