Financial Matters

Employed Now? Prepare To Be Unemployed

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Being prepared for the changing job market means you must be prepared to change jobs.

Few people start their working years thinking I cannot wait to start my 12 jobs! What? Yes, over the course of working years the average number of jobs a worker will have is 12, according to the Bureau of Labor Statistics. This has not always been the case, in fact generations ago people would retire from one company after dedicating decades of work. The reasons for the changing trend are varied but the reality for workers now is that job changes are more the norm than the exception. 

To be prepared to change jobs means you must be prepared to be unemployed.

Ideally you will control the timing of when you start and stop working but that does not always happen. Companies more and more are reducing workforces, relocating jobs and even relocating locations. All of these can mean one day you have a job and the next day you don’t. The timing can be jarring, emotionally and financially. The good news is that with forethought and planning the impact of an unwanted job change can be lessened.

Paycheck to Paycheck

The reality in America is that personal savings is very low and most households cannot withstand the loss of even one pay check. Some sources state almost 80% of workers are living paycheck to paycheck. Reich, Robert (July 29, 2018) Almost 80% of US workers live from paycheck to paycheck. Here’s why. 

Savings has always been an important part of a financial plan but when faced with a job interruption, it is the number one predictor of how well it will be managed. Adequate cash reserves means avoiding the use and overuse of credit cards, mounting debt, late and missed payments, and burdensome loans. Consumer debt is a hole that is difficult to climb out of once reemployed. 

Instead, Possibilities and Options

Cash on hand will not only lessen the emotional toll of an unwanted job change but it will give something priceless, time. If finding another position is critical because the mortgage must be paid and food provided, a worker will likely need to take the next available employment option. How would it feel to actually have time to look and find the position that will bring some enjoyment to your life? Take the time to research, to explore, to wait instead of jumping on the first job offered. It allows control to be regained after the world seemingly took it away.

Seem unrealistic? In fact high level corporate employees often negotiate large severance packages before starting a new position. Why? Because when they leave the job they will have the freedom that 6 months or a year or more of income can provide. Often considered a perk for highly compensated employees, it is something that everyone can build into their own plan.

What to do when faced with a job loss or change.

  1. Assess your liquid savings

How much do you have? Savings means money that is immediately spendable. Money in an investment account or retirement account is not immediately spendable because something may need to be sold before cash is accessible and the withdrawal may be subject to taxes and/or penalties, depending on the type of account. Ideally savings will total 6 months to a year of income.


  1. Understand what company benefits you will be losing.

Many companies provide health insurance, life insurance, disability insurance and matching contributions to retirement accounts. These benefits typically cease as soon as employment stops. Understand options for continuing or replacing these benefits. The company human resources department is a good place to start but to fully understand your options consult with a financial professional.

  1. Get a recent statement for your company sponsored retirement account. 

              Before leaving review your retirement plan. Understand how much you have and how much you get to keep.   Some companies have vesting schedules so you might not be able to keep all the money. If there is a company provided match into the account, when will the deposit occur? Some matches are deposited at the end of the year only if you are still employed. 

  1. Understand the rules that apply to your retirement account.

When leaving a company means leaving a retirement account such as a 401(k) or 403(b), there will be options with respect to what to do with the money. Some rules are determined by the company and others by the Internal Revenue Service. Depending on your age you may be able to withdraw money and not pay a penalty. Some retirement account plans will require you to take a distribution when you leave. Others will allow you to keep the money where it is. For some employees, moving the money to another account can be the best option. The most important thing to do before withdrawing money or moving your account is to consult with a financial professional and tax advisor. 

It might seem strange to plan for unemployment but for Americans this must become part of their financial plan. Instead of ignoring this reality and hoping for the best, protect yourself and your family so if and when it happens a period of unemployment won’t be as scary.

Asalyn Coachman is a Registered Representative of and offers Securities through The O.N. Equity Sales Company, Member FINRA/SIPC, 39395 W Twelve Mile Road, Ste. 102 Farmington Hills, MI 48331 (248) 482-3600. Investment Advisory Services offered through O.N. Investment Management Company. Financial Architects, Inc. is not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company.

Asalyn earned a degree in Economics from Harvard University and a law degree from the State University of New York at Buffalo. She lives in Lake Orion with her husband and two children where she is active in organizations such as the Harvard Club of Eastern Michigan, Lake Orion Schools, and the Baldwin Center of Pontiac, Michigan, where she serves as board president.

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