Navigating Financial Challenges After a Job Loss

Losing a job is one of the most stressful financial challenges many Americans face. If this happens to you, remember that you’re not alone. Our team is here to support you through this transition. Here are some steps you can take to manage the financial impact:

1. File for Unemployment Benefits

The first step is to replace your income by filing for unemployment benefits in your state. Benefits typically cover about 50% of your previous income for around 26 weeks.

2.  Ensure Health Insurance Coverage

Maintaining health insurance coverage is crucial. Check if you can join your spouse's plan, continue your current insurance under COBRA, or enroll through the Health Insurance Marketplace. Don't miss enrollment deadlines and let us help you explore your options.

3, Maintain Life Insurance

Ensure your family remains protected by life insurance. You may be able to continue your employer's policy if it's portable, or we can help you find a low-cost term life insurance policy that fits your needs.

4. Manage Your Budget

Creating a budget is essential during this time. Track your expenses and prioritize essential payments like rent, utilities, and food over unsecured debt. If you need assistance, our team can help you set up a budget.

5. How to Manage Your 401(k) When You Switch Jobs

Consider all options: 

• Take the cash: While it might be tempting to take a cash distribution from your 401(k), be aware of the taxes and fees involved. This includes a 20% federal withholding tax and a 10% penalty if you're under 59½ years old. 

• Directly roll the money into an IRA: An individual retirement account (IRA) is like a 401(k) but independent of any employer. This option is beneficial if you change jobs often or if your new employer doesn't offer retirement plans. 

• Use the new employer’s plan: Rolling your 401(k) savings into your new employer’s plan can help avoid IRS fees. Even if you're not yet eligible to contribute, you should be able to roll over your money. 

• Keep the old plan: If you have at least $5,000 in your old retirement account, your employer must allow you to retain it. You can no longer make contributions, but you can manage your investments. This option is useful if you start a business or want to diversify your retirement holdings. 

Navigating financial transitions can be challenging, but with the right guidance and support, you can make informed decisions that secure your financial future. Reach out to our team for personalized advice and assistance. 

The Importance of Research 

The right approach depends on several factors, including company rules and longevity. Is the company in financial trouble? What happens to your retirement plan if it goes under? Some employers may set lower thresholds for leaving retirement accounts behind. Speak with your HR department for answers.  

Financial professionals can also provide valuable guidance. At Hanscom Investment Services, our team helps clients navigate these and other important decisions affecting their economic future. 

1. https://www.gallup.com/workplace/231587/millennials-job-hopping-generation.aspx
2. https://money.usnews.com/money/retirement/401ks/articles/what-happens-to-your-401-k-when-youleave-your-job
3. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-termination-ofemployment

Download our free Financial First Aid Guide! It'll walk you through the best ways to manage your money during uncertain times. We’ll show you how to take inventory and review all your expenses, assess your debts, prioritize bills and communicate with creditors, and so much more!

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