Jill on Money: Your Layoff Protection Plan

Reports of death in the US labor market are greatly exaggerated. In January, 517,000 jobs were created, more than double analysts’ expectations, and the unemployment rate was his 3.4%, the lowest in over 53 years.

Not a buzzkill, but with the resilience of the labor market, now is the ideal time to put away your personal layoff protection plan. Check these items before the ax drops.

retirement

Many companies offer standard retirement packages defined as a fixed number of weeks. Other companies will also consider your tenure in the organization and add unused vacation and personal days as well.

Before you sign a document commemorating your retirement agreement, know that many companies negotiate sweet deals that may involve more dollars. If you work for a company that received stock options request early or immediate vesting for pending amounts. Note: Retirement benefits are income and are taxable.

Health insurance

Schedule regular physical and dental check-ups while you have your employer’s health insurance. If you lose your job, you have the right to extend your coverage through the federal Consolidated Comprehensive Budget Adjustment Act (COBRA). This allows workers who have lost their health insurance and their families to continue the group health coverage provided by the group health insurance plan. A limited period of time (usually up to 18 months).

A major drawback of COBRA is that you usually have to pay the full premium, which can be expensive. Check your coverage at HealthCare.gov before you worry about the cost. This could be cheaper than COBRA, especially if you qualify for tax credits.

Other insurance

If you have life insurance, disability insurance, or long-term care insurance through your job, check to see if it is “portable.” That means you can take it with you when you’re on the go. As with health insurance, costs can be higher if your employer subsidizes your coverage, but group coverage is usually cheaper than replacing your policy with private coverage.

retirement plan

When people lose their jobs, they often cash out their retirement plans to help with cash flow. That glass-breaking behavior should not be taken lightly. Generally, if you withdraw money from your retirement account under the age of 59½, the government imposes a 10% penalty on the amount you withdraw and also tax the gross amount of your distribution. [The SECURE Act 2.0 expands the ability to access retirement money penalty-free in certain cases.]

If you lose your job, you can usually keep your retirement account in place if the company’s plans are cheap with low-cost index funds. this is a good option. Otherwise, you can roll over your severance pay to an IRA rollover account at a large investment firm. If you find a job quickly, you should be able to roll over your old account directly to your new company’s retirement plan.

unemployment insurance reminder

Many workers have received tax-free enhanced unemployment benefits due to the impact of the new coronavirus. The system goes back to pre-pandemic times, and if you’re laid off, you’ll have to file a claim with the state you were employed in, and your unemployment benefits will be taxable again.

Sadly, most states have not upgraded their unemployment programs after being overwhelmed in 2020, so file your claims ASAP.

walk away gracefully

If you are caught off guard by a layoff, make sure you don’t lose control or burn bridges. Do your best to remain dignified, calm and focused.

You never know if or when you’ll cross paths with your boss or other colleagues in the future.

CFP’s Jill Schlesinger is a business analyst for CBS News. She is a former options her trader and her CIO at investment advisory firm, and she is available for comments and questions at askjill@jillonmoney.com. Check out her website at www.jillonmoney.com.