Losing your job? Financial checklist of 9 things you can do

One thing we can all agree on: 2020 has been full of surprises. As businesses adapted and responded to our public health crisis, you may have been laid off, furloughed, or terminated from your job. (Or you expect that to happen soon.) Maybe you’re considering stepping away from the workforce for a while for personal reasons until life is (more) “normal.”

“A sudden, unexpected job loss can be a shock. It’s natural to be worried, sad about the loss, or confused about what to do next,” says Heather Winston, assistant director of advice and planning at Principal®. If you feel overwhelmed, focus on what you can control.

Money may be your immediate concern, and we’re here to help with that. Each person’s situation is different, but this checklist can help you with financial decisions while you transition between jobs or step out of the workforce for a while.

Your checklist at a glance

  1. File for federal or state assistance.
  2. Review final paycheck.
  3. Browse health insurance options.
  4. Determine employee benefits termination date.
  5. Explore retirement plan decisions.
  6. Handle health savings account (HSA) funds.
  7. Check flexible spending account (FSA) balance.
  8. Review stock option rules.
  9. Confirm tuition reimbursement rules (if applicable).

1. Consider filing for federal or state assistance, if needed.

Apply for unemployment benefits. (You can learn more at usa.gov.) Each state runs its own program, and most offer an additional $300–$400 per week under the federal Lost Wages Assistance program, approved in August 2020. You may be able to file online, by phone, or in person.

2. Know what will be in your last paycheck so you can revise your budget.

Your last check could include back pay, vacation and sick days, commissions, severance, or a bonus. Knowing what’s in that check can help you revise your budget while you’re searching for your next gig.

“This might mean tightening your spending so you can cover your most critical, non-discretionary expenses,” Winston says. “If you run short, you could still tap your emergency fund, rather than use credit cards to finance day-to-day living expenses.”

Where could you cut costs? Look at monthly subscription services that you may not use much, or trim your online shopping habit, for example.

If you need cash to help you get through the transition period, read “COVID-19: 4 options to consider if you need emergency cash.”

3. Look into your health insurance options.

An unexpected health problem could have financial implications if you don’t have insurance, so make it one of the first things you decide.

  • You may be able to join the health insurance plan of a spouse/partner. You’ll likely need to sign up within 30 days of your last day on the job. “So don’t delay if you think this would be your best option,” Winston says.
  • COBRA stands for Consolidated Omnibus Budget Reconciliation Act. Passed in 1985, it allows you and your family to continue health insurance for up to 18 months after losing your coverage through work. COBRA can be pricey because you’ll pay the full premium (rather than your employer covering part of the cost). If you have dental and/or vision insurance in your old job, that’s included as part of COBRA, too.
  • An alternative is a Health Insurance Marketplace plan. Available plans vary from state-to-state, and depending on your household income, it could cost less than COBRA. Visit healthcare.gov to learn more.

4. Find out when your employee benefits terminate, and if you can take any with you.

“Is it the day you leave or the end of the month? Do you have a severance package that covers you through a certain date?” Winston says. Then look individually at your employee benefits.

  • Health, dental, and vision insurance: If you have this type of insurance and were given a termination date (such as two weeks), see if you can schedule appointments before you leave, while those expenses are still covered. That includes filling prescriptions, too.
  • Life insurance: If you bought or were provided extra life insurance coverage (called a voluntary policy) through your employer and want to keep it, start the paperwork to convert it from a group policy to an individual policy, if that’s offered. You’ll pay the premium directly to the insurance company, rather than having it payroll-deducted.
  • Retirement: You may have decisions to make about your retirement plan, such as a 401(k) or 403(b). More on that below.

Graphic of a thumbtack. Tip: Browse your company intranet for employee benefits information. Still have questions? Call your human resources (HR) contact or benefits administrator.

5. Decide what to do with your retirement plan, such as a 401(k) or 403(b).

First, find out when you have to make a decision about your old retirement plan. Your former employer can tell you if there are any specific timing guidelines to keep in mind. Winston says this is a big decision to make right now, but one you can control, while keeping an eye on the long-term.

Generally, you can choose among these four options:

  • Cash out your account balance. There are definite downsides to this. You may lose up to 30% of it to taxes and penalties, it could bump you into a higher tax bracket, plus you’ll miss out on any future growth or earnings. It may be tempting to have the extra money now, but there are better options for emergency cash than an early 401(k) withdrawal.
  • Roll your savings from your 401(k) into an IRA. Combining retirement accounts gives you flexibility in decision-making to help ensure your assets are supporting your goals. Learn how to start a rollover IRA.
  • Keep your money where it is, if that’s allowed under your old plan. Check with your former employer if you have a lower account balance. Many retirement plans don’t allow you to stay in the plan if your account balance is under a certain amount ($5,000 is common).
  • Move your money to your next employer’s plan. This is typically an option if you find another job within your retirement plan’s decision window and your new company offers a retirement plan and allows roll-ins.

If you’re still unsure, read more about the pros and cons of each option.

6. Decide what to do with Health Savings Account (HSA) funds if you have a High Deductible Health Plan (HDHP).

If you hope to enroll in an HDHP at your next job, you can often transfer a balance from your HSA. If you don’t plan to enroll in a HDHP, you can generally leave any remaining funds there and use as needed for future eligible health care expenses.

Graphic of a thumbtack. Tip: If you use HSA funds for unapproved expenses, there are tax implications.

7. Check your flexible spending account (FSA) balance.

Brush up on the rules for your company’s FSA benefit and deadlines. Submit claims for dependent care or health care expenses through your termination date so you can be reimbursed. If you have a balance, what you don’t use, you lose. In other words, it's time to shop for FSA-eligible items. (Your employer has a list.)

8. If you have stock options or restricted stock awards, find out the rules for vesting, what you get when you leave, tax implications, and so on.

If you’ve been getting non-salary compensation, know the vesting period and what percentage of compensation is available to you, if any, when you leave. Many companies require you to exercise stock options within a certain amount of time, often 90 days from your termination date.

9. Check your company’s tuition reimbursement program if you’ve been taking a class.

If your last day on the job is in the middle of a semester, find out if you’ll be reimbursed for that semester’s expenses. Winston says some companies require you to remain there for a certain length of time or you may have to pay back the funds you received. Check for specific rules about how your company handles reimbursement if you’re laid off vs. fired.

“Dealing with job loss can be stressful, but you can still make good decisions about what comes next,” Winston says.

Next steps

  • If you have a Principal retirement account or insurance from your employer, log in to principal.com to check it, learn about rollover options, access personalized planning, and sign up for our newsletter. First time logging in? Create an account. If you have questions about your insurance with Principal, visit our help page.
  • Ask for help. A financial professional can talk you through your options after a job change. Don’t have one? Check with your HR contact or employer to see if your company’s retirement savings plan offers this service. Or, we’ll help you find one.
  • If you’re interested in an IRA to keep saving for retirement, read how to start a rollover IRA or see if an IRA with Principal may be a good fit for you.

Principal® does not make available products related to Health Savings Accounts.​

You should consider the differences in investment options and risks, fees and expenses, tax implications, services and penalty-free withdrawals for your various options. There may be other factors to consider due to your specific needs and situation. You may wish to consult your tax advisor or legal counsel. 

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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