Items to consider and choices to make
Few events are more stressful and disruptive than an unexpected job loss or layoff. For many, it’s a hit not just to finances but also to confidence and sense of self.
You’re not alone if you’ve been laid off or if the idea is an all-consuming concern. According to a recent survey, one in three workers have layoff anxiety and over five million Americans “lose or leave” their jobs each month.(1,2)
Even if a job loss or layoff comes unexpectedly, you may have more choices than you think. Here are some items to consider.
Emergency Fund
Financial professionals suggest that individuals set aside three to six months of living expenses to help through tough times. It can be emotionally challenging to tap into these hard-earned funds, but using what you have on hand can be an option rather than taking on debt.
Family Budget
If your income has changed, your budget may need to change too. Expenses like housing, utilities, groceries, and healthcare may have fixed payment schedules, but you can manage dining out, entertainment subscriptions, and personal travel.
Health Insurance
For some, one of the most critical benefits of employment is health insurance. COBRA “continuation coverage” can help you temporarily maintain your existing coverage, but the cost may be higher than you expect. Review all your options. Health insurance often has a significant impact on personal finances, so financial professionals encourage individuals to address it as soon as possible.
Network & Upskilling
You may never have a better time to explore career possibilities and develop both new and old skills. Consider attending industry events, joining online forums, and reconnecting with former colleagues. Online and in-person courses can be a great way to add certifications and other highly desirable capabilities to your resume. Don’t forget to brush up on interviewing skills, too!
Employee-Sponsored Retirement Accounts
After a job loss, you may need to make some choices about what to do with your retirement plan. Generally, you have four basic options:
- You can leave the assets in the old employer’s plan, if the plan permits.
- You can roll the assets over into your new employer’s plan, if available and the plan permits.
- You can roll the assets over into an Individual Retirement Account (IRA).
- You can take a cash distribution and deal with the potential tax consequences.
Each of these options has some advantages and disadvantages to consider. Consider discussing your situation with a financial professional and possibly a human resources professional in order to explore all your options.
If you roll over your account into an IRA, remember that in most circumstances you must begin taking the required minimum distributions when you reach age 73. Withdrawals from traditional IRAs are taxed as ordinary income and may be subject to a federal income tax penalty if taken before age 59½.
Employee-Sponsored Retirement Accounts
When your life changes, your goals and strategies may well change. A job loss or layoff can require a temporary adjustment to your financial situation, and it may open up new opportunities. Your retirement timeline and savings target may change, but keeping up with your long-term commitments can help you stay focused and motivated in the short term.
Citations.
1. CNBC.com, February 12, 2025
2. BLS.gov, 2025
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