Whether you are starting a new job or if you’ve been laid off, there are many things to consider during a life event like this. Today we’ll share four things that you may want to consider high priority at such a time.
- Maintain your health insurance after you are laid off.
Assuming you have good coverage, also consider using your current insurance benefits while you still have them.
- COBRA is an acronym used to describe continuing coverage through your former employer’s group health insurance plan. Will you receive COBRA coverage for a period of time as part of a severance package? COBRA costs are generally high for individuals, but the benefits may be better than purchasing an individual private policy.
- Private Health Insurance may also be an option.
- Assistance can sometimes be available depending on your income. Indiana also has the Healthy Indiana Plan or HIP. The Federal govt. also has Income Tax Credits available for some individuals purchasing coverage through the Healthcare Exchange.
- What should you do with your 401k when changing jobs?
Now this question by itself could be an entire discussion so I’ll keep it brief. Advisors often recommend a direct transfer (or rollover) of your 401(k) to an IRA. In many instances, that can be a good decision. However, there may be reasons to keep your account inside your former employer’s 401(k) – if the 401(k) plan allows you to do so.
- If you rollover your 401(k) to an IRA and later need money from that IRA prior to age 59 ½, you’ll generally not only pay income tax on the withdrawal but also a whopping 10% penalty as well…unless an exception applies. However, if you were age 55 or older in the calendar year of separation from your employer, tax law allows you to withdraw money from your 401(k) account without the 10% penalty.
- Another consideration would be the costs inside the 401(k) plan vs. elsewhere.
- And it’s not an either/or decision. For example, your new or future employer may have a 401(k) plan that would allow you to roll these dollars into it.
- Regardless of what you do with your account, be sure you have properly designated beneficiaries to ensure your desires are met at your death. These beneficiary designations typically supersede your will.
- You may have big cash flow decisions to make with a severance or pension.
Well, don’t be too quick to make a decision. You wouldn’t want to make a decision you may later regret. There are many things you’ll want to consider before making these decisions. We’ve recorded other videos on these topics so I won’t go into details now. In the search bar at the top of our page, search for:
- Do you have life insurance that you’ll lose once you are laid off or change jobs?
If so, is there a need to purchase additional coverage?
In addition to these 4 important considerations, step back for a moment and breathe deeply. Think about what’s really important to you in life, consider your passions and talents, and carefully examine how you want to experience your next phase of life. Then start planning how to make that happen.
Change can be unsettling, especially for those who are not prepared. Often, even the best events in life – a birth, new job or dream relocation – can be more rewarding by having a financial plan. Payne Wealth Partners and Keystone Financial Consulting are purposely built to provide clarity, confidence and peace of mind in the face of a life transition through a planning-centric solution that is relevant to your unique situation. No one knows the future, but everyone can prepare for it.
Let’s start a conversation about wealth management that’s focused on planning for the past, current, and future changes and ultimately what is most important to you.
Published: January 15, 2016
Author: Terry Prather, CFP®, ChFC®, MSFS
Phone: (812) 602-6307
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The information in this material is only as current as the date indicted, and may be superseded by subsequent market events or for other reasons. Statements concerning financial market trends are based on current market conditions, which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements.