Debt Free Article

What to do if you think you will be fired

Before the pink slip arrives on your desk, be certain that you have an emergency fund. About 3-4 months equivalent to your usual income needs to be tucked away somewhere safe for you to use if you think you are about to get fired,. The only way to plan properly for this is to actually start as soon as possible. Obviously if you get fired unexpectedly, you will be really hurting financially if you have not reserve to live on until you get hired at another job.

Money market funds are a good place for you to keep this reserve – one that has a check writing ability to it. This way, as you are adding to this fund, you can take advantage of the higher rates it will usually provide to you. Regular checking accounts are not the place for emergency funds. They do not provide interest paid. If they do, it is a smaller rate than other accounts that will make your money grow while it is sitting there.

Unless you live under a rock, you are most likely aware that lay offs happen – and sometimes they are extremely unexpected.  Corporate America is not free of lay offs at any time. Whether or not it is due to technology or companies tightening their belts, is not the point – it happens more than you will ever know. The point is that you should be prepared no matter what. You have an overwhelming amount of decisions to make if it does. This debt free article will help answer some of the major concerns workers have regarding all the financial issues you face if you should lose your job.

Does your company provide continued health insurance coverage in the event you leave voluntarily or involuntarily? Many companies offer you an option to continue health insurance at the same rate the company pays fro a maximum of 18 months. After that, you are on your own.

What will happen to your pension or 401(k) benefits? When you are let go from your job and you have contributed to 401(k) plan, you might have to take all of your contributions in a lump sum distribution. That is a large amount of money in many cases – especially if you have been with that company for many years. You will have to make some quick decisions regarding this money if you lose your job – you have about 60 days to get that money into another similar account before you are subject to tax penalties. Here is what we recommend you do with these funds:

• Roll it over into a new IRA (deposited directly from your employer. By doing it this way, you keep up the tax deferred savings without penalties involved fro early withdrawal. By doing so, you will not get hit by the 10% tax penalty doled out by the IRS, which is on top of the income tax penalty you will pay if you keep the money – however, if you take hold of the check, then the company must withhold 20% for income taxes. Keep in mind; you are only permitted one IRA rollover each year.
• You do not have much more flexibility with your pension benefits, unless you are being offered early retirement. You will have to meet with your employee benefits department to figure out what is allowed according to their plan. During this meeting, find out how much of your benefits you own, known as being vested. You can roll that money into an IRA, or you may have to leave it with the company until you retire. Get the specifics here for sure.
• Do you have access to outpatient counselors through your company? If you do, take them up on it for sure.
• Finally, are you going to get any type of severance pay? Two weeks salary is the typical amount involved. Also, employers can pay you in a lump sum or over a period of a few weeks. You can take the lump sum or over a period of a few weeks. You can take the lump sum, but understand for sure that you will face a bigger tax bill next April if you get the money at the end of the year. The decision is up to you. If you are going to get a severance, why not lobby for more? The worst thing that could happen here is that they say – no.

(752)

Back to Debt Free Articles