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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, you can prioritize which resources you can tap first to tide you over. While it may be tempting to reach 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. Not only do these loans typically carry relatively low interest rates, but interest payments are generally 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 If you have been contributing to a Roth account, those funds can be withdrawn tax free, since you've already paid taxes on them.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 at www.healthcare.gov.
  • 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.1
  • 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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1 You have choices for what to do with your employer-sponsored retirement plan accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over your eligible savings to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan from a prior employer to an employer-sponsored plan at your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment, and provide different protection from creditors and legal judgments. These are complex choices and should be considered with care. Visit the Merrill Edge® rollover page or call a Merrill Edge® rollover specialist at 1.888.637.3343 for additional information about your choices.

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