The potential for a job loss in today's economy is very real. That's why it's critical to be prepared — whether for a job loss or other potential crisis.
If you are newly unemployed, here are seven actions you should take.
1. File for unemployment benefits
To receive unemployment insurance benefits, you need to file a claim with the unemployment insurance program in the state where you worked. Depending on the state, claims may be filed in person, by telephone, or online. Federal law permits significant flexibility for states to provide unemployment insurance benefits for COVID-19 related circumstances including:
- An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work.
- An individual is quarantined with the expectation of returning to work after the quarantine is over.
- An individual leaves employment due to a risk of exposure or infection or to care for a family member.
2. Get on a budget and find ways to cut back
Start with a list of all your income and expenses. Include only expenses that are necessary. Now is the time to cut back on the unnecessary expenses that you can. Stop subscriptions to streaming services and cable, cancel health club memberships, eat at home.
3. Review your health insurance options
If you have a spouse or partner who has an employer health plan that you’re eligible to join, consider looking into that option.
If you and your dependents are covered by an employer-sponsored health insurance plan, a provision of COBRA entitles you to continue coverage when you'd normally lose it. Most larger employers (20+ employees) are required to offer COBRA coverage. Under COBRA you can continue your health insurance for 18 months if your employment has been terminated or if your work hours have been reduced. The premium you pay will be both the employee share and the employer share.
4. Consider taking severance
Taking severance pay, if it’s offered, in a lump sum gives you control over your money, but you may lose some employee benefits such as group health insurance. If you take your severance as a continuation of salary, you may be able to keep your benefits.
5. Talk to your creditors
Try negotiating with your creditors to lower interest rates on your credit cards, defer a payment or two on your car loan, or reduce your monthly payments temporarily. You also may be able to lower your home mortgage monthly payments by refinancing to a lower rate (if you can qualify in spite of your job loss), or by negotiating a longer repayment period.
6. Look for ways to increase your income
Consider a part-time or temporary job. Also, your spouse or partner may be able to get a job if he or she is not already working.
You may be able to borrow from the cash value of your life insurance policies. But you'll be limited as to how much you can borrow by the amount of cash available and other policy restrictions. And you'll be charged interest on the borrowed funds, so if you don't repay the loan, it can reduce your death benefit or even cause the insurance to lapse.
7. Consider a withdrawal from your retirement account
Generally, as a last resort, you may need to consider withdrawing from your tax-deferred retirement accounts, such as your IRA or 401(k). Any money you withdraw from these types of accounts likely will be taxed as ordinary income but the 10% penalty for early withdrawal (pre age 59½) is waived for coronavirus-related distributions. Always work with your financial and tax advisors before making significant financial decisions like withdrawing from your retirement account.
We are here to help you
Together, we can review your options based on your specific financial situation. We are here to help you navigate any short-term financial needs while we continue to support your long-term financial goals.