Layoff Survival Guide: Back to work! September 20, 2009

So, let’s say you’ve gotten a job offer.  Congratulations!  But now you may be wondering what to do about all those changes you had to deal with when you got laid off.  What do you do about your health insurance coverage now?  And how do you stop collecting unemployment?  What are all the things you have to deal with when you’re starting a new job?

A friend of mine asked me to write about this subject.  Well, one friend complained that my Layoff Survival Guide was too depressing, so my other friend (who is still looking for a new job) suggested this would be a happy twist to the posts.

So, with my first post, I talked about 401(k)s.  At your new job, you’ll likely be given the option to enroll in their 401(k) program (or similar program for non-profits, government jobs, and the like).  Sometimes you’ll have to wait to enroll, or wait for them to match or somehow contribute to your account.  I recommend signing up for a 401(k).  If they provide a matching contribution, I would strongly encourage you to sign up.  There are usually a few different options for funds you can invest in.  Don’t let that part intimidate you!  If you’re not sure, there’s often someone you can call at  the company running your 401(k) (or even in you HR department)  that can give you some general guidance.  And while I’m not a certified financial adviser, I would suggest you look into a “life cycle fund”, one that invests in funds that are more aggressive if you’re not retiring for many decades, and become more conservative as you get closer to retirement.  That’s what I’m doing with my IRAs.  For my 401(k), I’ve tried to make a diversified portfolio with assorted styles of funds, and only looking at the funds with low or no expense ratio.

Next I told you about COBRA and transitioning your healthcare coverage.  Now that you’re at a new job, you’ll likely have access to a discounted (or free) health insurance program (depending on what your company offers).  If the new insurance available is, in your opinion, better (cost-wise, or cover-wise, or other factors important to you) than what you’d been on while unemployed, you should sign up!  Confirm that your new health insurance is officially started, then get in touch with your former company’s HR person in charge of health insurance, and/or your previous insurance company, and let them know that you’re on a new plan.

Finally, I discussed collecting unemployment.  At least for me, in Massachusetts, I didn’t have to call to cancel.  I just stopped filing claims.  Hopefully, that’s what I was supposed to do!  I had asked a friend what she did when she got a new job, and she said she did the same thing.  It may differ from state to state, so check in with your state’s Office of Labor to confirm.

Hopefully this has given you a good idea of what you can look forward to once you get a new job.  As always, feel free to comment or email me if you have any questions.

Teach Me Tuesday: CD Ladders September 8, 2009

Teach Me Tuesday is back!  I started it back up because 1:  a friend called me out on not doing any more (sorry!), and 2:  another friend was wondering what his options are for saving money.  So, here we go!

Friend #2 asked me for some advice, because he knows I’m into personal finance.  His general situation (which I’m pretty sure he doesn’t mind me sharing!) is that he’s currently contributing quite a bit to his 401(k), beyond the company match but not to the limit imposed by the IRS.  He wants to continue to save money, but also doesn’t want it all locked away for retirement.  He thinks he might want to have kids soon, and so would like to have his savings a bit more liquid.  He figured he’d either lower his contribution rate and make up for it with contribution to a savings account, or just start putting more in savings instead of increasing his contribution rate to his 401(k).

I suggested that, instead of using savings accounts, he could try CDs.  And even better, a CD Ladder!

True story:  I was with my parents at the bank maybe 10-15 years ago, and one of the bankers kept trying to get my parents to buy CDs.  And yep, I thought they were talking about albums.  I’m not even joking.  I think I asked my parents later, and that cleared everything up.

So what are CDs when we’re not talking about Compact Discs?  They’re Certificates of Deposit.  Basically, they’re a method of investing/saving money where you put a certain amount of money in for a certain amount of time and you’re guaranteed a specific return on your investment.  How is this different from a regular savings account?  Usually, you can get a better interest rate from CDs (which is an upside of CDs).  With a savings account, you can usually withdraw your money whenever you want (assuming you haven’t exceeded your allowance of transactions in a given time frame, and have money in the account), and can save as little as you want at one time and overall (i.e. saving $100 a month, keeping a few thousand dollars at a time).  With CDs, you must keep your money in the bank for the agreed upon amount of time, otherwise you’ll end up paying penalties and/or losing out on the original interest rate.  And you usually have to put in a pretty big amount of money all at once (depending on the bank).

So here’s the deal.  CDs can be pretty excellent for long term investments of a large chunk of money.  But if you want your money a bit more liquid, so that it’s not all tied up for years, but you want to keep it in a CD long enough so you can get a decent interest rate, many financial smarties suggest using a CD Ladder.  I will admit that I’m not as familiar with these as some more experienced personal finance bloggers.  So I’m just going to link you to some good posts by them.  I figure you can ask them for more help.  The basic gist of these is that you spread out your investments in some shorter term CDs and longer term CDs so that you take advantage of the higher interest rates of some while making sure you haven’t locked yourself out of all your money.  And once you’ve set up a CD Ladder, you can continue using that method year after year.

Two good places for advice on how to do a CD Ladder:

How to Create the Ultimate Certificate of Deposit (CD) Ladder by Flexo at Consumerism Commentary

Creating a CD Ladder for your Emergency Fund or Other Savings to Earn a Better, Safe Return by Trent at The Simple Dollar

CDs and CD Ladders aren’t for everyone.  When should you NOT do CD Laddering?  If you don’t have enough money to be comfortable having a certain amount off limits.  Also, if you know you’re going to need the money before the CD reaches maturity, you shouldn’t put it in a CD.  Also, it’s possible that for your time frame, the rate on a savings account (or money market account) could be more than that of a short-term CD.  So you’ll want to compare your options.

I’m not a certified financial planner, so this isn’t professional advice, merely me trying to spread some information that I’ve found from others.

I suggested that my friend do an automatic transfer into his savings on a regular basis, and perhaps buy a CD when he gets enough saved up.

What do you think he should do?  Lower the 401(k) contribution while upping the savings?  Or just up the savings?  And have any of you done a CD ladder?  Is the trouble worth it for the returns?

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.

How do YOU choose your investments? August 2, 2008

So, after my post the other day about my 401(k) portfolio decisions, I got some really great input about what to look for when selecting investments. I got some great advice, including to look out for the expense ratio, since that’s going to be costing you quite a bit over the long run.

And so I’m opening up the comments to hear from you. What sort of decisions do you make when you’re picking investments…does it depend on the sort of account (IRA, Roth IRA, 401(k)/403(b), plain old brokerage account, etc.)? What’s important to you? Historical performance, volatility, size, growth/value/blend, actual investments? In the category of “actual investments”, are you concerned about “socially concious mutual funds? I may have shared this before, but I found a neat tool that helps you to find out if there are investments within your funds that don’t jive with your social/economic/environmental goals.

I feel like some of these factors will depend on how open to risk you are, what amounts of money you’re investing, what time frame you’re looking at, and what your goals are with your investment.  But really, I’d love to hear from you on what impacts your decisions on investments.  In a way, this post is a bit self-serving, since I’m looking for the advice.  But I hope others that come here can read through the comments and get some ideas themselves.

Thanks in advance for all your advice!

Enrolling in my new 401(k) July 27, 2008

As I mentioned before, I got a new job!  And with that job came a 401(k) that the company matches up to 4%.  So, as any personal finance person knows, I’m going to definitely contribute at least 4% to my 401(k).  Hello!  Free Money!  Always a good perk.

The difficult part is deciding what to invest in.  I have to consider my whole retirement portfolio, not just my 401(k), as I’ve got a Roth IRA that I’ve been trying to fully fund each year, plus a rollover IRA for my last job’s 401(k).  It also sounds like I am allowed to roll money from the rollover IRA into my new 401(k) (according to the paperwork I got from work), so I’ll need to decide if I should do that.  It seems a bit like it’s a draw either way, as they’re both from pre-tax contributions, so there isn’t an obvious advantage either way.  It would probably just help to get a better idea of my portfolio if I have fewer separate accounts to consider.  I’ll think about it a little more before I decide.

As for the portfolio decisions, I’m thinking I want to select a wide variety of funds.  The options available in this plan are pretty good, as they encompass all sorts of investment strategies and comfort levels.  They have funds that fit any combination of the Morningstar style categories (Small, Mid, Large; Value, Blend, Growth).  There are also funds with certain sectors of stocks:  Technology, Healthcare, Real Estate.  They also have a fund that helps you buy stock in the company.  I know in terms of the company stock, I wont put too much in that one.  I don’t have anything against the company, I just know it’s a bit risky to have too much of your portfolio invested in one stock, especially if the stock is for your own company.  You’re that much more dependent on the success of your company.  Plenty of former Enron employees were in horrible financial situations after the company went down the tubes because they not only lost their jobs, but they also had been heavily invested in the Enron stock (I believe the company match in their case was company stock).  When a large part of your portfolio ceases to exist, you’re in for trouble!  All that aside, I have confidence that my employer is going to be around for a while, so I’m not too worried about that sort of thing happening.  But it always could.  So, like I said, I wont be investing too much into their stock.

I think I realized something weird.  My investment strategy is a bit weak.  At my old company’s 401(k) plan, I basically looked for funds with high Morningstar ratings (4 or 5 stars) and that fit in the “growth” category.  I figured that I should go for the growth funds, as I was under the impression that those were the best ones for young people like me who can handle short term instability in favor of long term gains.  I’m now not quite sure I should have had most of my money in Growth funds, as Value funds take on a different approach, but could still be just as risky.  As this article states, Growth funds depend on the fact that the funds have a lot of momentum, and so they can increase fairly quickly.  The downside is that the momentum works in both directions, which means you could end up with a considerable loss.  So that’s why those are considered good for long term investments.  The Value funds, they explained, look for cheaper investments with the hope that they’ll increase in value.  It’s that whole basic idea of “buy low, sell high”.  And Blend funds, as they state, are the funds that don’t fit on either side.  They may either have a combination of the Growth and Value funds, or they may just have a wide variety of investments that act as a good portfolio diversification.  So, I think I had used the fact that Growth is volatile to mean it was okay for young investors, as most investment guides say that younger investors can handle the short term troubles that can arise.

So, I guess all this discussion, and I’m still not quite sure what to do.  I’m interested in putting a little bit towards the company stock, and a little bit in the Technology fund, but other than that, I’m a bit in the dark.  They have life-cycle funds available, but I figured I’m too heavily invested in those as it is with my Roth and rollover IRAs.  I’ll just enter a tentative portfolio initially to get myself enrolled in the 401(k) and start getting the matched contributions.  I’ll just have to adjust my portfolio once I actually take a little more time to do the research on the individual options available.

I’ll probably also increase my contribution after a while.  Right now the plan is to contribute up to the match.  I did sign up with the option they have available through the 401(k) to increase your contribution by a 1-3% each year.  I set it to increase by 1% every year.  I’m not sure when exactly it will stop increasing, but I’m okay with it for now.  I guess the idea with it, in part, might be that you intend to get raises at certain times of the year, and so you can keep a similar take-home pay as before, but start contributing more to your account.  It’s also helpful so that you can start off with a minimal amount coming out of your paycheck, and as you go, you’ll be more comfortable with it as you build up emergency savings and other investments.

Oh, one thing I noticed, I mentioned Morningstar a good amount in this post.  This isn’t a sponsored post or anything.  It’s more of what I first heard about when I was setting up my portfolio for my last 401(k).

Well, I’d better get to bed soon.  I’ve found that I can get a heck of a lot more tired these days, now that I’ve started working, which includes waking up a lot earlier than I’d been getting used to.

Next step in determining what to do with all the company benefits:  select a medical insurance plan.  They have 5 options available, and I’ve got to sort through all the pros and cons of each.  More on this later!

A quick update on my post-layoff transitions June 23, 2008

First up, I have clarification on what happens to your FSA account after a layoff.  I called the company that was in charge of my FSA and they straightened me out on the matter.  So here’s the deal.  I have to submit my claims for any that occurred on or before the date of departure.  And according to the person I talked to, you are allowed to use up to the total amount you initially elected to contribute, even if you haven’t contributed all of it.  It’s apparently an official rule from the IRS.  I guess they figure if you have an expense, you don’t plan on getting laid off before you contribute all of the money towards that expense.

So, that makes me feel slightly better.

Also, I have rolled over my 401(k) to an IRA at the same company that I have my Roth IRA.  I’ve used about half of the rollover money to purchase a target date fund for around the year I retire, and am going to let it just chill there for a while, and half the other half sit in the core money market account.  Yes, I should be investing all of it.  But buying that much of one fund freaked me out.  So, hopefully down the line, I’ll invest a little bit more in something more aggressive than the money market.

As unemployment is concerned, I’m having the taxes taken out prior to the money getting to me, so that I won’t have to deal with estimated taxes.  I’m not even sure if I have to pay estimated taxes for the money I’m getting, but it seemed too complicated, and I figured that they take out taxes in the lowest bracket, so it shouldn’t be too bad.

As I’ve been going through my job search, I’ve been slowly getting a better idea of what I actually want to be doing.  I started out with an enormous list of companies, both big and small, that might have positions for me, and slowly whittled them down to companies with jobs that actually fit my experience, background, and career goals.  I don’t want to go into too much detail here about my job search, but if you have any specific questions, ideas, or anything for me regarding the job search process, please let me know in the comments or via email.

Rolling over my 401(k), and other transitions May 16, 2008

Well, I got the official paperwork today telling me about all the options I have for the money in my former employer’s 401(k) plan.  They’ve given me plenty of options, some of which I think are not so good (i.e. taking the money out for myself), and the two that I’m mostly considering:  roll over to an IRA or roll over to a new 401(k) plan.  The problem with the latter option is that I don’t have a new job yet, and I don’t know if I’d even be able to roll over the 401(k) with them (it differs for different companies).  So it seems that my best bet is to open a Traditional IRA and roll my 401(k) into that.

I’m going to open up an IRA with the same company that I have my Roth IRA with, and presumably buy a life-cycle/age-based/target-date fund with a target date of 2050 or so.  My one concern is, even though these funds are supposedly diversified, I am thinking of investing in both IRAs in that fun…that’s not very diversified!  However, there are minimums for purchasing a fund in many cases, so perhaps I’d just let my money grow using those funds (and continuing to invest in my Roth IRA), and slowly build until I have more money to spend on different funds.

At any rate, I’m thinking it’s still my plan to roll over to an IRA.  I’m a bit ticked off that my old company’s 401(k) company is going to charge me a $40 processing fee, but hey, not much I can do.  They charge it for pretty much every option that I would do.

As for my other transitions (since I got laid off), I’ve filed for unemployment and been informed of how much I’ll be earning each week, and of course, looking for a new job.  And as I look at different job postings, I’m starting to understand what I do and don’t want to be doing.  This is a pretty helpful development, since I was so overwhelmed initially thinking of all the different career paths I could follow.

I’ll keep you updated!

A strange day indeed January 13, 2008

This past Friday I had more people visiting my blog than I usually have in a whole month.  It all started because FreeMoneyFinance posted a link to my post about Roth IRAs in a list of “Star Money Articles“.  Seems that many people followed that link to my blog.  And because so many people had visited my particular post, it became popular enough of wordpress posts that it was on the WordPress homepage under Business News (it’s not there anymore).

I feel like I should thank the writer of FreeMoneyFinance for mentioning me.  Isn’t that what bloggers do?  But thanks especially to those who commented.  I was thinking some about putting all the money in at once…and also wondering if I should put more into my 401(k).  I agree that paying off debt is a surefire way to have good returns in the long run (since you’ll pay less on interest as you pay down your debts).  I think I’m a bit uncomfortable with upping my 401(k) contributions since I don’t want to have too little money available (I’m a bit of a worst-case-scenario type of person), and I figure the more money I have now, the more I can pay off my student loans.

I appreciate all your comments, and hopefully others benefited from the advice as well.  Keep the comments coming; the more we all know, the better we can get at this!

(or as they said on the most recent episode of Monk:  The more you know, the less you don’t know!)

I rebalanced my 401(k) portfolio! December 13, 2007

Well I managed to rebalance my portfolio! it. I finally figured out how to rebalance my 401(k) portfolio. It turns out, it’s REALLY easy to do, I just never clicked on the right link. I had way too much money in one fund (as I discussed before), but was moving towards 5 funds at 20% each. They’re mostly in growth funds, since I’m at a point where I can handle more risk (that is, I’m still pretty far away from retirement age). I figure I’ll rebalance them again in 6 months, know that I’m finally a lot more diversified; having 75% of your money in one fund just isn’t a good idea!

Diversifying my 401(k) October 31, 2007

So, I just got my 3rd quarter 401(k) statement. They have a message at the bottom reminding me that I have a “right to diversify [my] investment portfolio”. I’m just wondering how exactly that works.

Let’s start at the begining. I signed up for the 401(k) pretty soon after I started work, and listened to the whole “diversify” thing…but not really. I ended up putting 90% of my contributions in one fund…that had the word “diversified” in it…it took a while for me to try to readjust to something less dangerous (that is, contribute to more funds), but now a bulk of my money is still in one fund. I called my 401(k) people to see what I can do about it…and there is an option to rebalance. But is it really as simple as pressing 1 or whatever on the phone? I’m not sure if I want everything rebalanced all at once.

I guess I’ll have to call them again when I’m more sure of what should happen.

[Edit: It was really easy to do...check out this page to see how it went.]