You’ve Been Downsized. Now What?
As unemployment figures have risen during the recent downturn, you may have started to worry about the worst-case scenario: “What would I do if I lost my job?” Fortunately, there are positive actions you can take, regardless of your employment situation now. While you may not be able to dictate whether or not you maintain your job, you can control what you do about the challenges that downsizing presents.
Know your benefits
Familiarize yourself with the benefits offered by your company and your state agency. Does your employer offer an outplacement agency for employees who have been laid off? Do you qualify for pension or severance benefits? What is your income eligibility for unemployment?
Unemployment benefits are especially important to understand and to take advantage of if you are laid off. You may think you can manage without them—and maybe you can—but remember that you have worked to put money into the system and it is there to help you. It’s also best to get the ball rolling early, as the unemployment process can be lengthy.
Make risk management a priority
Manage risks associated with your health and the legacy you will leave behind for your family. If you won’t receive a severance option with salary continuation, and you do not have outside health insurance, you will need to obtain coverage.
Fortunately, there is a program set up to help individuals who have experienced a job loss. COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. There are guidelines regarding who may receive COBRA benefits and for how long; visit the U.S. Department of Labor website (www.dol.gov) for details. If you do not qualify, or if your coverage period runs out, you may need to purchase individual health insurance.
If your only source of insurance is through your employer—which will lapse with unemployment—you should consider your insurance needs and options. Many people may have only purchased term policies because they had life insurance through their employer. You may need a life insurance policy.
If you have existing outside policies, it’s important that you do all you can to keep them in force. Don’t let short-term setbacks eliminate the premium you’ve invested to safeguard your loved ones.
Track your dollars and cents
For many, budget is a dirty word—but it doesn’t have to be. Done correctly, a budget does account for every dollar and cent you spend, but instead of considering this a tedious task, consider the real difference it can make in your financial health. In good times or bad, a budget can help you gain a true picture of your spending and where you may be able to save more to keep your other goals on track.
One of the greatest insights a budget can provide is an understanding of essential (housing, electricity, heat) and nonessential (daily latte, dining out four times a week, paying overdue charges on credit cards) expenses.
Assess your net worth
Many of us have an idea of what we own—investment accounts, real estate, and so on—but it’s always a great idea to document your net worth to help maintain a true picture of your finances. Moreover, a net worth statement considers your liabilities and your assets to give you a better idea of liquid assets versus money that may not be easily accessible.
Keep your credit in good order
To ensure that your credit is in check, one critical number you must be conscious of is your credit score. Lending institutions, insurance agencies, and prospective employers use your credit score to evaluate your responsibility and creditworthiness. This score dictates the rates you get on loans, the premiums you pay on policies, and sometimes whether or not you attain the job you want.
You can acquire a free annual copy of your credit report from the following agencies:
• www.annualcreditreport.com• www.Equifax.com
• www.Experian.com
• www.Transunion.com</</a>b>
You should correct any discrepancies on your credit report immediately to avoid costly changes to your credit score. The agencies offer procedures for you to do this.
Your score, however, doesn’t come free; you can pay to receive your score from any of the agencies. If your score needs to be improved, it’s even more critical now to ensure that you pay your bills on time and limit the amount of open credit you have. If your credit score is in good shape, be sure to keep it that way. Typically, an annual review of your report suffices to make sure nothing suspicious has cropped up.
Control your retirement accounts
If, after reviewing your finances and discussing them with a professional, your only option is to access your retirement account funds, you should know the implications. Generally, premature distributions (prior to age 59½) from a retirement account are subject to regular income tax and a 10-percent federal penalty. Some states also have an additional state penalty. You should consult with a professional regarding the full tax implications.
When you leave your company, you are likely also leaving behind a company-sponsored retirement plan. Many people do not think to move these funds (or to roll them over) to an IRA upon departure—and that’s a mistake. You lose control over your investments when you leave them behind in an old plan. There are some restrictions on what can be rolled over and into what vehicle. A financial professional can help you work through this process.
If you have a pension plan from your former employer, there are laws protecting you from losing your benefits, even in the event of a job loss; companies offering pensions must meet certain requirements and are held accountable by the Employee Retirement Income Security Act. If you are concerned about some element of your pension, contact a financial professional to discuss what protections are in place and how they may apply.
Seek professional guidance
You may be able to manage many of the above actions yourself, but there are some that require the assistance of a professional, such as:
• Rolling over your 401(k)
• Assessing and meeting your insurance needs
• Mapping out a financial strategy that considers your temporary setback
Indeed, your time is more appropriately spent navigating through ... Wendy B. Namack, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional and the Managing Principal of Namack Portfolio Investment Advisors, LLC, North Port Commons, 14892 Tamiami Trail, North Port, FL 34287. She offers securities and advisory services through Commonwealth Financial Network®, a member firm of FINRA/SIPC and a Registered Investment Adviser. Wendy can be reached at (941) 429-3055 or at Wendy@Namack.com. Please visit her website: www.Namack.com for additional information.
© 2009 Commonwealth Financial Network®
Know your benefits
Familiarize yourself with the benefits offered by your company and your state agency. Does your employer offer an outplacement agency for employees who have been laid off? Do you qualify for pension or severance benefits? What is your income eligibility for unemployment?
Unemployment benefits are especially important to understand and to take advantage of if you are laid off. You may think you can manage without them—and maybe you can—but remember that you have worked to put money into the system and it is there to help you. It’s also best to get the ball rolling early, as the unemployment process can be lengthy.
Make risk management a priority
Manage risks associated with your health and the legacy you will leave behind for your family. If you won’t receive a severance option with salary continuation, and you do not have outside health insurance, you will need to obtain coverage.
Fortunately, there is a program set up to help individuals who have experienced a job loss. COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. There are guidelines regarding who may receive COBRA benefits and for how long; visit the U.S. Department of Labor website (www.dol.gov) for details. If you do not qualify, or if your coverage period runs out, you may need to purchase individual health insurance.
If your only source of insurance is through your employer—which will lapse with unemployment—you should consider your insurance needs and options. Many people may have only purchased term policies because they had life insurance through their employer. You may need a life insurance policy.
If you have existing outside policies, it’s important that you do all you can to keep them in force. Don’t let short-term setbacks eliminate the premium you’ve invested to safeguard your loved ones.
Track your dollars and cents
For many, budget is a dirty word—but it doesn’t have to be. Done correctly, a budget does account for every dollar and cent you spend, but instead of considering this a tedious task, consider the real difference it can make in your financial health. In good times or bad, a budget can help you gain a true picture of your spending and where you may be able to save more to keep your other goals on track.
One of the greatest insights a budget can provide is an understanding of essential (housing, electricity, heat) and nonessential (daily latte, dining out four times a week, paying overdue charges on credit cards) expenses.
Assess your net worth
Many of us have an idea of what we own—investment accounts, real estate, and so on—but it’s always a great idea to document your net worth to help maintain a true picture of your finances. Moreover, a net worth statement considers your liabilities and your assets to give you a better idea of liquid assets versus money that may not be easily accessible.
Keep your credit in good order
To ensure that your credit is in check, one critical number you must be conscious of is your credit score. Lending institutions, insurance agencies, and prospective employers use your credit score to evaluate your responsibility and creditworthiness. This score dictates the rates you get on loans, the premiums you pay on policies, and sometimes whether or not you attain the job you want.
You can acquire a free annual copy of your credit report from the following agencies:
• www.annualcreditreport.com• www.Equifax.com
• www.Experian.com
• www.Transunion.com</</a>b>
You should correct any discrepancies on your credit report immediately to avoid costly changes to your credit score. The agencies offer procedures for you to do this.
Your score, however, doesn’t come free; you can pay to receive your score from any of the agencies. If your score needs to be improved, it’s even more critical now to ensure that you pay your bills on time and limit the amount of open credit you have. If your credit score is in good shape, be sure to keep it that way. Typically, an annual review of your report suffices to make sure nothing suspicious has cropped up.
Control your retirement accounts
If, after reviewing your finances and discussing them with a professional, your only option is to access your retirement account funds, you should know the implications. Generally, premature distributions (prior to age 59½) from a retirement account are subject to regular income tax and a 10-percent federal penalty. Some states also have an additional state penalty. You should consult with a professional regarding the full tax implications.
When you leave your company, you are likely also leaving behind a company-sponsored retirement plan. Many people do not think to move these funds (or to roll them over) to an IRA upon departure—and that’s a mistake. You lose control over your investments when you leave them behind in an old plan. There are some restrictions on what can be rolled over and into what vehicle. A financial professional can help you work through this process.
If you have a pension plan from your former employer, there are laws protecting you from losing your benefits, even in the event of a job loss; companies offering pensions must meet certain requirements and are held accountable by the Employee Retirement Income Security Act. If you are concerned about some element of your pension, contact a financial professional to discuss what protections are in place and how they may apply.
Seek professional guidance
You may be able to manage many of the above actions yourself, but there are some that require the assistance of a professional, such as:
• Rolling over your 401(k)
• Assessing and meeting your insurance needs
• Mapping out a financial strategy that considers your temporary setback
Indeed, your time is more appropriately spent navigating through ... Wendy B. Namack, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional and the Managing Principal of Namack Portfolio Investment Advisors, LLC, North Port Commons, 14892 Tamiami Trail, North Port, FL 34287. She offers securities and advisory services through Commonwealth Financial Network®, a member firm of FINRA/SIPC and a Registered Investment Adviser. Wendy can be reached at (941) 429-3055 or at Wendy@Namack.com. Please visit her website: www.Namack.com for additional information.
© 2009 Commonwealth Financial Network®
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