What You can Save After a Job Loss

There are three things to think about right away after a job loss to protect yourself and not to lose more than your job.

First, think about your health insurance. Once you have lost your job, your employer will not be paying your premiums. The best bet is to go with the Consolidated Omnibus Budget Reconciliation Act (COBRA) plan. This plan allows you to continue your present health insurance coverage even though you are not employed under your employer’s group plan. You will have to still pay the premiums, but at least it will be at a group rate and not an individual rate—phew. You have 60 days to elect COBRA, which will last for 18 months maximum. When Cobra expires, then you will have to get your own insurance, which will be costly.

Many unemployed do not elect to take part in COBRA until the 60th day—going with out health insurance. The hope is you will find a job before that time is up, and you can elect COBRA retroactively, meaning if you have medical expenses even on the 59th day, you can still elect and be accepted into COBRA. However, if you have a pre-existing condition, you should elect COBRA immediately because a new health insurance plan can refuse to cover you for 6 months to a year if you have not had continuous coverage.

Next, think about your 401K. It is best not to give into the temptation to withdraw monies from your 401K. These monies are for your future, not for an emergency. You will also pay large penalties to withdraw your money, making it worth less than your investment.

What you should be thinking about is transferring your 401K from the company that has just laid you off. You should check with your former HR office or with the financial institution which manages your 401K to find out what exit fees your might have to pay in order to transfer your investment. Hopefully, you will transfer it to a new plan under a new employer, but your can also roll over your 401K into a new plan that you set up yourself.

Finally, think about applying for unemployment. Remember this benefit is something you have paid for already through taxes and is not welfare. If you are planning to apply, do so immediately because it can take two or three weeks before the application is processed and you can receive a check. It is wise to have Federal Withholding Tax taken out of your check to avoid being hit with back taxes. Even with a new job, that is an extra and unneeded expense.

To qualify for unemployment in your state, you will have to have earned a certain amount of money and /or worked a certain length of time before being unemployed. You also can not have been fired for bad performance. Check with DepartmentofLabor.org for contact information to apply for unemployment in your state.

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