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As fears grow that the US economy is heading into a recession, a number of companies have announced massive waves of layoffs.
It’s a sharp reversal after a year or more of mass voluntary quits and job changes amid plentiful job opportunities across the country, in a trend known as the “Great Quit.”
Among the recent layoff announcements:
- Cryptocurrency exchange Coinbase shared this week that it was laying off almost a fifth of its workforce, or about 1,100 people.
- Real estate companies Compass and Redfin announced workforce reductions of 10% and 8%, respectively.
- Tesla CEO Elon Musk sent an email to employees earlier this month telling them of his intention to cut 10% of employees.
- Mail-order clothing service Stitch Fix said earlier this month it was cutting its workforce by about 15%.
“We don’t know where the job market is going yet,” said Andrew Stettner, unemployment expert and senior fellow at progressive think tank The Century Foundation. “But clearly a lot of things are warning signs.”
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Losing your job and income can be extremely disruptive and trigger a myriad of financial problems.
However, by focusing on the first steps after a layoff, you can avoid spiraling too much and increase your chances of a positive next chapter, experts say.
1. File as soon as possible to collect unemployment benefits
You should file for unemployment benefits as soon as possible, Stettner said.
If you received unemployment benefits earlier in the pandemic and are now facing unemployment again, you may be eligible for additional help.
Rules vary from state to state, but generally, as long as you’ve worked at least 15 weeks since the last time you received unemployment benefits, you can open a new partial payment claim, Stettner said. . Most people will need to have worked for at least six months to be eligible for a full benefit again.
If you have been working for more than a year, your benefits should arrive fairly quickly.
2. Evaluate health insurance options
Then you also want to make sure that you don’t end up without health insurance.
“As overwhelming as it can be, it’s important to seek coverage quickly” after a layoff, said Caitlin Donovan, a spokesperson for the National Patient Advocate Foundation, a nonprofit that helps individuals access to health care and to pay for it.
Your first step should be to speak to someone in your company’s human resources department to understand when your coverage technically ends.
“There’s no general rule here: for some, coverage may end immediately; for others, it may last until the end of the month,” Donovan said. “Anyway, you should immediately start planning the transition to a new plan.”
Navigating the health insurance landscape alone can be stressful and confusing.
There are resources you can turn to for help. If you have a diagnosed condition, including cancer, lupus or diabetes, you may be able to get help deciding and enrolling in a plan with the National Patient Advocate Foundation, Donovan said. You can also consult a local health care “browser”.
Typically, newly laid off, uninsured people will have three coverage paths to choose from: COBRA, the Affordable Care Act subsidized marketplace, or a public plan such as Medicaid or Medicare.
COBRA gives those who have left a company the option of remaining on their former employer’s insurance plan, although it is usually very expensive. That’s because people have to keep paying the part of their premium that they were responsible for while they were working, plus the rest that their previous employer had covered.
Medicaid typically involves zero or low monthly premiums, and the plans on the market are the cheapest they’ve ever been for many people, thanks to pandemic relief legislation.
3. Protect your retirement savings
Many people save for their retirement through their work. If you had access to a 401(k) plan at the company you were terminated from, you will need to decide what to do with that account.
You might not want to do anything, said Rita Assaf, executive vice president of retirement at Fidelity.
Most employers allow you to keep your plan with them after you leave, Assaf said. (However, if you have less than $5,000 in the account, the money can be sent to an Individual Retirement Account for you, she added.)
However, you will not be able to continue contributing to a plan at a company you no longer work for. And you may be limited in the amount you can borrow or withdraw from the account.
Another option is to transfer the account into an IRA, which can be opened at a bank or brokerage firm. This would allow you to continue saving. You will also be able to withdraw money from this account if you are under 59.5 without any penalty, Assaf said, if you use it for a first home purchase or higher education expenses.
“Be sure to research fees and expenses when choosing an IRA provider, if you do, because they can really vary,” Assaf said.
If you immediately move to another job, you may have the option of turning your old 401(k) plan into one with your new employer. Having just one retirement savings account may seem more manageable.
“It’s important to note that not all employers will accept a rollover from a previous employer’s plan, so you should check with your new employer before making any decisions,” Assaf said.
What you don’t want to do, if possible, is cash out the account, she said. You’ll likely be burdened with taxes and penalties, not to mention risking your financial security when you leave the job for good.
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