Job loss checklist

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The unexpected loss of your job may seem more like a crisis than an opportunity, but hard work and careful planning may help you avert immediate or long-term financial difficulties. This checklist is designed to help.

Consider these resources to help you stay afloat

During times of economic hardship, prioritize the resources you can tap first to tide you over. While it may be tempting to reach first for large pots of money such as retirement savings, other potential sources may not have the same impact on your long-term plans:
  • Savings accounts or liquid investments such as money market funds may be the simplest to tap, and short-term interest rates are at historically low levels
  • Home equity loans or lines of credit can be a way to leverage the equity in your home. These loans typically carry relatively low interest rates, although interest payments are generally no longer tax deductible. It may be useful to set up an equity line of credit beforehand, while you are employed, so that funds could be available when you need them.
  • Roth contributions might be an efficient way to tap into your retirement savings, if you do find it necessary. If you have been contributing to a Roth account, those funds can be withdrawn tax free, since you've already paid taxes on them.
  • Social Security could be a resource if you are otherwise eligible and are aged 62 or older. You should weigh this option very carefully if you hadn't considered it before, especially if you have reasonable prospects for finding another job. The decision is generally irrevocable and, depending on when you retire, starting benefits at age 62 could result in a reduction of your monthly payment by as much as 30%.

Weigh your options to replace any lost health insurance

If you rely on an employer-sponsored health care plan, losing a job can have serious financial consequences. Consider these replacement possibilities.
  • Join your partner's plan. If you have a working spouse or partner who is eligible to enroll in an employer-sponsored medical plan, adding yourself to this plan is probably the simplest and least expensive way to maintain coverage while you are out of work
  • Opt for continued coverage under COBRA. In many circumstances, you can continue membership in your former employer's group plan for individual or family health insurance for up to 18 months at your own expense. You have 60 days to decide whether to buy COBRA coverage.
  • Shop on your state's health insurance exchange or go to the national site
  • Enroll individually in an HMO or PPO. If you go this route, make sure to shop around, as plans differ widely.

Take care of your retirement plan assets

Leaving a job does not mean abandoning your retirement plan assets. Here are your basic choices.
  • Stay put. Generally, you may be able to leave your savings in your existing plan if your account balance is more than $5,000. By doing so, you'll continue to enjoy tax-deferred or tax-free compounding potential, and receive regular financial account statements and performance reports.
  • Cash out. If you do take a cash distribution, your employer could withhold 20% as an advance payment on your eventual income tax liability for the year. You may also be subject to a 10% additional federal tax, plus state taxes and even state penalties. Taken together, you could lose up to 50% of your money to federal, state and local income taxes.
  • Roll over. You can move your retirement plan money into another qualified account, such as an IRA. A direct rollover has no immediate income tax consequences.
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The material was authored by a third party, DST Retirement Solutions, LLC, an SS&C company ("SS&C"), not affiliated with Merrill or any of its affiliates and is for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.

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