Receiving notice of layoff or an offer of a buyout package may mean big changes for you and your family. Will you be able to stay in your city? Maintain your quality of life? Find new employment quickly? Taking the time to make the appropriate decisions for your situation can improve the probability of staying on track with your long-term financial plan. Below we’ll look at eight important things to do if you find yourself in this situation.
- Take the time to understand the options your company is giving. Often, you will have many decisions to make that will affect your cash flow, income, investments, savings, and tax liabilities. It is okay to be uncertain which option is best for you. Consult with your attorney, CPA, and financial advisor if you need help.
- Check the vesting schedule on your 401k or any investments you have through the company. The balance you see on your statement or when you log in may not all be going with you when you leave. This is important to realize as you work through the planning process during your transition.
- Understand how to manage your stock options, employee stock purchase plan or any other kind of incentive compensation. Are you required to keep it where it is? Can you move it? Should you move it?
- Review the benefits that your employer has provided for you and your dependents. These benefits could include health insurance, life insurance, short and long-term disability insurance, a healthcare savings account (HSA), and accrued vacation and sick time. How long will these benefits continue? Can important coverage continue via another family member’s policy? Will you need to purchase coverage for yourself or dependents? What about COBRA?
- Explore options for your retirement funds (i.e. your 401k/403b). This could be a time to consider converting to an IRA or a Roth IRA. There are many factors to consider as you work with your retirement funds after you’ve left. Fees, investment options, access to advice and tax consequences of any moves you make are important factors you should evaluate prior to making any decisions.
- Evaluate the potential tax implications of having income from your prior job plus severance package money in addition to income from a new job. Having multiple income sources at the same time could significantly affect your tax rate.
- Look at your family’s cash reserve and liquid investments. You should formulate a financial plan in the case that you don’t go back to work right away.
- Revisit the investment allocations in your retirement plan. What is the effect of your changing income on your short and long-term financial plan? Does the plan still “work” as it was designed, or do adjustments need to be made?
If you need help with any of these matters or have questions about the financial implications of your changing employment situation, schedule a 15 minute call with us. We’d be happy to help walk you through the first steps.
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