Layoff Survival Guide: Collecting unemployment June 28, 2009

These days, a lot of people are getting laid off.  And one thing you should take care of is filing for unemployment benefits.  Eligibility requirements and compensation amounts vary from state to state, so you should go to the site for your state to find out if you’re eligible and how to apply.  You can find information for any state here (found via this Department of Labor page).

One thing that originally confused me was that in many states, they call it Unemployment Insurance.  I guess they call it that because companies pay into it and then when someone loses a job, they are able to collect money.  Still, this isn’t quite “free” money; you have to pay income taxes on it, just like any other income.  Luckily, another tax perk of the American Recovery and Reinvestment Act is that “the first $2,400 of unemployment benefits an individual receives in 2009 are tax free“.  That’s a pretty nice deal!

From experience, I know that filing a claim can be a bit of a hassle, especially since, in most cases, you either have to go to an Unemployment office or call…and these days with so many people filing, you’re in for a wait.  Luckily, once I filed, I was able to submit my weekly claims online.  For the weekly claims, I had to assert that I had indeed been looking for work.  I was supposed to keep track of my job search (which is a good idea anyway) in case they wanted proof, and I had to let them know that I was willing and able to work, and if I earned any wages that week (due to part time jobs).  I think you’re still allowed to earn wages, it just lowers the amount of unemployment benefits you receive for that week.  And once I got a job offer, I stopped filing claims.

So, go ahead and file!  When I first got laid off, I felt weird about collecting unemployment, but realized that, really, that’s what the money’s there for!  Your (former) employer has to pay into this fund, you might as well take advantage of it!

As usual, let me know if you have any other questions related to surviving unemployment, or if you have any insight on this topic.  I’m here to help!

Layoff Survival Guide: What’s this COBRA thing? June 26, 2009

Hopefully you found my last post in my newly minted Layoff Survival Guide useful.  And if not, here’s another chance for some helpful advice!

So, like I said last time, a really good friend of mine lost her job, and is now dealing with all the issues I had to deal with a little over a year ago.  So I figured I’d help her out, and maybe help others out along the way.  Behold, the power of blogging!

Her question for me was about COBRA.  What is it, what does she need to do, what are her options?

Let’s start with a simple definition.  COBRA stands for Consolidated Omnibus Budget Reconciliation Act.  Yeah, that doesn’t mean a lot to me either.   But when you’re handed a severance package with all sorts of information, one thing you’re told about is COBRA (and if you didn’t get any info for COBRA, I recommend you contact your former employer to find out what’s up).

Basically, COBRA entitles you to continue your health coverage that you received through your employer.  Except you will be paying the premium (rather than your former employer).  However, recent legislation from The American Recovery And Reinvestment Act allows for assistance in your insurance premiums through COBRA.  As stated on this Department of Labor page:

“Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.”

There also is an income threshold that you need to be under in order to fully benefit for this program.  For more information, you can check out their Fact Sheet for COBRA Premium Reduction here.

If you don’t elect to continue your insurance from your previous job through COBRA, you still have options.  A friend forwarded me a link to a site that helps you pick out insurance options (in Massachusetts).  And the DOL has another good page telling you about how to attain health insurance.  You can search for a private insurance plan, or may be eligible for a government plan such as medicare.  Also, if you have a spouse with health insurance, you can get on his/her plan.  I’m not an expert on the different types of insurance, so you might have to do some searching on your own.  Also, there are apparently some tax implications with some health insurance premiums, that I’ll let you check out on your own (mostly because I’m not as familiar with these tax rules).

What did I do?  Well, luckily, my severance package included a month of health insurance coverage, so I was able to depend on that while figuring everything else out.  I ended up paying the hefty premiums for COBRA coverage, continuing the coverage I enjoyed while at my old job.  It may not have been the best decision, financially, but it was the “easy” thing to do.  I found it difficult to sort through all my alternative options for health insurance.

Why is it important to have continued health coverage?  There are a few reasons.  As I learned firsthand a month into unemployment, you never know when you might need insurance.  My boyfriend hurt himself mountain biking, and I drove him to the hospital.  Since he had health insurance, he wasn’t stuck with an enormous hospital bill.  Saving money by not paying for health insurance could end up losing you money if you end up requiring an expensive medical procedure.  Or you may have to decide if a procedure is financially worth it, even if it’s medically important.

Another reason you don’t want your insurance to lapse is because it might make it more difficult to prove that any condition you have down the road isn’t a preexisting condition.  I know that’s more of a worry/fear than an actual fact, so take that with a grain of salt.

So what do you need to do?  Decide whether or not you’re going to continue your insurance plan through COBRA (talk to your former employer/fill out the forms they gave you).

So, like I’ve said before, I’m not a legal expert or anything, so this is merely friendly advice.  But if you see any errors or omissions here, or have specific questions, let me know in the comments or via email.  And if you have other layoff-related questions, you can ping me with those as well!

Layoff Survival Guide: What to do with your 401(k) June 19, 2009

A good friend of mine recently got laid off.  And, since I went through this about a year ago, I’ve got plenty of advice.

I’ve decided to start a little series, the Layoff Survival Guide.  I’ll be answering questions that she has, and will be more than happy to answer any questions you have.  I’m not a professional financial adviser or career coach, but I’ve learned a lot about surviving a layoff, and the transitions and decisions that come with it.  Plus I might have some advice on finding a new job.  I already have a few posts for some of these topics (linked to in previous sentence), but I don’t mind focusing on a specific question or topic.

So, ask away!  I’ll try my best to find the information you are looking for!

One of the questions my friend sent me was:  What do I do with my 401(k)?

I realize that  plenty of people have posted about what to do with your 401(k) after you leave your job (either voluntarily or involuntarily).  A really good guest post by The Working Dollar at  Get Rich Slowly describing  your options can be found here.

Still, here’s my own view of your options:

Keep your money where it is.  This isn’t the option for everyone.  In fact, it depends on the rules of your company and the firm they run the 401(k) through.  There’s usually a certain amount of money you need to have in the account in order to keep it there.  If you’re happy with your portfolio there, and you are allowed to keep your money there, then you can go ahead and keep it around.  If you aren’t able to keep your money there, or you don’t like how your money is invested, or if they’ll start charging a fee or impose other rules you’re not comfortable with, then you might want to consider the other options.  The benefit to keeping it (if you can) would be that you wouldn’t have to “sell” your funds, and could hope to make back the losses from the crummy stock market performance.  When my boyfriend left his last job, he just kept all his investments at the old company, since he actually had really good investment options there, whereas I was not happy with my options after I got laid off, so I rolled my 401(k) over.

Roll over to an IRA (or Roth IRA).  If you can’t (or don’t want to) keep your money where it is, you can roll it over to an IRA.  Most investment companies (like Fidelity, Vanguard, or T. Rowe Price) (click those to go directly to their rollover sites) have an option to roll your money over from your 401(k) into an IRA.  The important thing to remember here is that you should check with both the organization that has your old 401(k) and the company that you want to roll over your money with, to see how you can move the money without incurring fees or taxes.  They’ll tell you what to do!  You can now also roll over your money into a Roth IRA, but will need to deal with the taxes there (pre-tax money to post-tax money).  The benefit of having an IRA is that you have more choices on what to do with your money.  It’s an investment vehicle, where you can buy all sorts of different investments…not just the 10 or so mutual funds that your company lists for you.  Another good post about IRAs (from Get Rich Slowly) can be found here.

You also have the option to Roll over your old 401(k) into a new employer sponsored plan.  I don’t know as much about this option, but it seems that it would require you to have your new job already.  You’d need to be able to keep your retirement savings somewhere (i.e. the old 401(k)) while you wait for your new plan to take effect.

And, finally, my least favorite option, Cash it out.  I don’t recommend this unless you have a really good reason to.  You’ll be hit with taxes all at once, and will likely have to face fees as well, quickly dwindling down the actual amount you will get.

What did I do?  Since I was not happy with my investments in my old 401(k), I decided to roll my money over to an IRA.  And since I already had a Roth IRA at Fidelity, I decided to open a rollover IRA there.  It was pretty darn easy, and they answered all the questions and concerns I had.  Plus they have a lot of investment options, many of which don’t require fees.  I’ve heard good things of lots of the other investment companies, so take a look around your options before committing to a specific company.

Vanguard also lays out the pros and cons of each option (as does Fidelity).  Like I said before, this information is everywhere.  But I just figured I’d lay it out again for anyone looking for some guidance.

Have any questions about what I wrote?  Suggestions?  Corrections?  I don’t claim to be a financial adviser or expert, so hopefully you’ll take what I’ve written and run with it (and if there are mistakes, I’ll be sure to edit it to reflect corrections you submit).

Also, what other questions do you have about the transition from employment to unemployment?  I’ll be answering them here!  Leave a comment or email me the question at graduatedlearning@gmail.com.