I lost my job. How can I stay on track financially?

Text size: aA aA aA
Managing financially following a job loss may require negotiating a severance package with your former employer, filing for unemployment compensation, arranging for continuation of health insurance, keeping your retirement assets invested, and, for those aged 62 or older, deciding whether to collect Social Security benefits.

Income stream

First, do what you can to generate an income stream that will pay for food, housing, and other necessities. Many employers offer severance programs in which former employees continue to receive a salary after a layoff for a period of time determined by the employee's length of service. If your employer has not offered a severance program, try to negotiate one. Also determine whether you qualify for unemployment compensation. There may be a waiting period before collecting benefits, and applying as soon as possible could expedite your claim. If you are a union member, determine whether union programs may be available to help you.

Health insurance

If you were covered by an employer-sponsored health plan at an organization that employed 20 or more people, you may be eligible for continuation of health coverage required by the Consolidated Omnibus Budget Reconciliation Act (COBRA).Footnote 1 Historically, laid-off workers who elected COBRA coverage were required to pay the full premium, which usually was significantly more than they paid when they were employed.

Retirement assets

If you participated in an employer-sponsored retirement plan, determine your options.Footnote 2 Keeping this money invested could increase the chances that the investments have an opportunity to grow and could be a potential source of income when you retire. When an employee separates from service, taking a cash distribution prior to age 59½ (55 in some circumstances) triggers income tax payments and a 10% additional federal tax. Even if you are older than age 59½, consider leaving the money invested for your future.

Social security

Individuals aged 62 or older may be eligible to collect Social Security. If you are in this age group, consider your decision carefully because the age when you begin Social Security benefits has a significant bearing on your financial future. Depending on your full retirement age, starting benefits at age 62 could result in a reduction of your monthly payment by as much as 30%.Footnote 3 Waiting until closer to your full retirement age, if you are able to do it financially, could leave you with a higher benefit during your later years.
Creating an ongoing income stream, maintaining health insurance, keeping your retirement assets intact, and, if applicable, investigating Social Security benefits could help you stay on track financially.

Footnote 1 Source: U.S. Department of Labor, Employee Benefits Security Administration, FAQs About COBRA Continuation Health Coverage.

Footnote 2 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 them 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, and 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 888.637.3343 for additional information about your choices.

Footnote 3 Source: Social Security Administration.

© DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

This material is authored by DST Systems, Inc. and was not authored by Merrill Edge. Assumptions, opinions and estimates constitute judgment from DST Systems, Inc. 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 suitable for your particular circumstances and, if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

ARWS9NRT-EXP061418