Monthly Tid Bits

You've Been Downsized. Now What?

As unemployment figures have risen during the recent downturn, have you found yourself wondering, “What would I do if I lost my job?”

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 if you are laid off. You may be able to manage without them, but remember that you have worked to put money into the system and it is there to help you. Be sure to get the ball rolling early, as the unemployment process can be lengthy.

Make risk management a priority

• Health insurance. 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.

COBRA provides the right to temporary continuation of health coverage at group ratesfor: < >Former employeesRetireesSpousesFormer spousesDependent childrenU.S. Department of Labor website provides guidelines regarding who may receive COBRA benefits and for how long. If you don't qualify, or if your coverage period runs out, you may need to purchase individual health insurance.

• Life insurance. Employer-provided life insurance lapses with unemployment. If you have purchased a term policy because you had life insurance through your employer, you may need a life insurance policy.If you have existing outside policies, 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
A budget can make a real difference in your financial health by helping you gain a true picture of your spending and where you may be able to save more to keep 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
Documenting your net worth can help you maintain a true picture of your finances. In addition, 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
Be conscious of your credit score. Lending institutions, insurance agencies, and prospective employers use this score to evaluate your responsibility and creditworthiness. The 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.

A free annual copy of your credit report is available at:

• www.annualcreditreport.com
• www.Equifax.com
• www.Experian.com
• www.Transunion.com

Be sure to correct any discrepancies on your credit report immediately to avoid costly changes to your credit score. The agencies offer procedures to help you do this.

Your actual score isn't free, but you can pay to receive it from any of the above agencies.

• If your score needs to be improved, it's critical 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 will suffice to make sure nothing suspicious has cropped up.

Control your retirement accounts
A financial professional can help you decide the best course of action in the following situations:

• Retirement account distributions. If you have to withdraw funds from your retirement account, be aware that premature distributions (prior to age 59½) are generally subject to regular income tax and a 10-percent federal penalty. Some states also have an additional state penalty.
• Rollovers. When you leave your company, you are likely leaving behind a company-sponsored retirement plan. Many people do not think to move these funds (or to roll them over) to an IRA—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.
• Pension plans. There are laws protecting you from losing your pension plan 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.

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:

• Rolling over your 401(k)
• Assessing and meeting your insurance needs
• Mapping out a financial strategy that considers your temporary setback

Your time is more appropriately spent navigating through the sudden change you've experienced, rather than mulling over the complex details of different benefits, tax consequences, and investment options.Which leads us to the number one priority when you've been downsized—safeguarding your well-being and that of your family. Be sure the financial professional you choose to work with shares the same priority.