Job loss

  1. Prepare - Accumulate emergency savings if a job loss appears likely or is announced far in advance. Also reduce household debt and discretionary spending. Apply for home equity line of credit while still employed in case it is needed.
  2. Use jobless benefits - State unemployment benefits, employer-provided outplacement services and financial counseling.
  3. Severance - Study what is available and what needs to done to maximize what is offered. Set aside 35-40% for income taxes.
  4. Health insurance - Do everything possible to maintain coverage. Make medical and dental appointments while still covered by employer's plan. Extend coverage under COBRA law that allows departed employees to buy coverage at company's group rate for up to 18 months. Must apply within 60 days of termination.
  5. Contact creditors - Explain job loss to creditors and request reduced payments or extension of time to pay bills while searching for new job. Seek forbearance agreement with mortgage lender that eliminates or reduces payments for a set period of time.
  6. Retirement savings - Try to avoid cashing in tax-deferred retirement plan assets to pay living expenses while unemployed.

Early retirement
Rather than resort to layoffs, many employers offer longer term employees early retirement packages as an incentive to leave voluntarily.

Issues to consider:
  1. Health insurance - Is medical insurance provided?
  2. Pension impact - What benefits might be foregone by retiring earlier than expected?
  3. Further cutbacks - If early retirement offer is not accepted, what is risk of being laid off later?


Dependents with special needs

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