Suddenly Unemployed? Your Action Plan After Job Loss

Losing a job feels awful. Your sense of security goes out the window, and it’s hard to know what to do next. If you're currently navigating this big challenge and wondering what to do if you're out of work, know that you're not alone, and there are concrete steps you can take to regain your footing.

This guide is designed to provide a clear path forward, starting with things you can do today (like applying for unemployment benefits and assessing your current finances) to take proactive steps forward. While this time can be unsettling, it's also an opportunity to access support, plan your next move, and focus on your well-being.

Start with our interactive “Out of Work” Coach that will work with you to make a plan for handling this (hopefully short) season of your life.

Before you pack up your desk, consider asking your employer for:

• A detailed reference letter
• Information about severance pay
• Details on the continuation of benefits, such as COBRA (more on that below)
• Assistance with job placement or outplacement services
• Information on any unused vacation or sick pay
• Details on your 401(k), pension plan, or any other retirement benefits
• Clarification on how your departure will be communicated internally and externally

You should change your budget as you plan your next move. It may be a good idea to cut down on non-essential expenses and prioritize necessities until you secure your next job.

A healthy emergency fund can be a major help for getting through periods of unemployment. Ideally, you already have an emergency fund saved up with 3-6 months' worth of essential living that you can tap into. If you don’t have any emergency savings, don’t worry, there are other ways to find extra cash.

You might be surprised at the number of ways you can spend less money. The Trim Your Budget Coach can help you find all of those small areas where you can cut back and save from extra cash. You’ll start by entering in your current expenses, and the Coach will help you find ways to reduce your spending.

Unemployment insurance is a program that provides temporary financial aid to those who are unemployed through no fault of their own. It can be a great way to help you get by if you’re in a rough spot financially while looking for a new job.

1. Visit the state's official unemployment website:

This is your primary resource. Visit the state’s website for specific instructions and eligibility rules for where you live.

2. Confirm your eligibility:

Generally, you’ll qualify for unemployment insurance if you lost your job through no fault of your own and meet past wage/work requirements. Your state's website will have the exact details you’ll need to know.

3. Gather necessary documents:

You'll typically need your Social Security number, driver's license/state ID, recent employer details (names, addresses, dates of employment), and reason for losing your job.

4. File your claim:

Most states prefer online applications on their official website. Follow the prompts carefully and make sure you provide accurate information about your employment history and earnings.

5. Look for a benefits decision letter:

Try to be patient as the government processes everything, and eventually the state will mail (or electronically send) a determination notice. This letter will explain if you're approved, your weekly benefit amount, and how long you can receive benefits.

6. Certify for benefits regularly:

To keep receiving unemployment benefits, you must usually file a weekly or bi-weekly claim (often called "certifying"). This confirms you are still unemployed and meeting eligibility requirements, like being able to and available to work.

7. Actively search for work:

Most states require you to be actively looking for a new job while collecting benefits. Keep records of your job search activities as proof. Typically, unemployment benefits are 26 weeks, but they may be extended during widespread unemployment. Please note that any income received through unemployment is considered taxable.

To learn more about other government programs that could assist you at this time, check out this article about government benefits.

Severance can make a huge difference in managing your finances after facing unemployment. Best-case scenario, you’ll receive a financial life raft of sorts that can keep you afloat until you find your next job. Unfortunately, the best-case scenario isn’t always the most likely scenario, so you may need to negotiate a severance package for yourself.

Negotiating a severance, especially when you’ve just lost your job, can feel like an intimidating prospect, but it doesn’t hurt to try, and these steps can help you build your confidence and your case.

1. Review documents:

Check your employment contract or company policy for any existing severance guidelines.

2. Know your value:

Document as many contributions as you can think of during your tenure, and provide that documentation in your negotiation meeting.

3. Identify your key requests:

Decide what you are hoping to walk away with, such as additional pay or health insurance.

4. Request a meeting:

Formally schedule time to discuss the severance terms professionally with a decision maker.

5. Make your case:

Clearly explain why you're asking for more, focusing on your value to the company.

6. Get It in writing:

Ensure any agreed-upon terms are documented in a formal severance agreement.

7. Review before signing:

Carefully read the agreement; consider legal advice if it's complex or you're waiving rights.

If you had a retirement plan with your former employer, you've got some decisions to make. Remember, you always own your contributions and any earnings on them. However, your employer's contributions (like matching funds) are subject to their "vesting" schedule, which determines how much of that company money is yours to take based on how long you worked there.

Here are your main options for what to do with the available funds in your old plan:

1. Roll it over to a new employer's plan:

If your new job offers a 401(k) (or similar plan) and allows rollovers, this can be a simple way to keep your retirement savings consolidated. You'd maintain the tax-advantaged status, and it might be easier to manage everything in one place.

2. Roll it over to an IRA (Individual Retirement Account):

This is a very common choice. Rolling your funds into an IRA gives you control over the account and often provides a wider range of investment options than an employer plan. This also maintains the tax-advantaged growth.

3. Leave it with your old employer (if allowed):

Some plans allow you to keep your money in the 401(k) even after you leave, especially if your balance is over a certain amount (often $5,000 or $7,000). This might be an option if you like the plan's investment choices and fees. Be aware that you most likely won’t be able to make additional contributions to this plan.

4. Cash it out (use caution!):

You can choose to take the money as a lump sum. However, be very careful: this is usually a last resort. The withdrawn amount will typically be taxed as ordinary income, and if you're under age 59 ½, you'll likely face an additional 10% early withdrawal penalty from the IRS. This can significantly reduce your savings.

Think carefully about these options, considering factors like fees, investment choices, and your long-term retirement strategy. Consulting with a financial advisor can also be very helpful.

Losing your job often means losing your employer-sponsored health insurance, but take courage! You have several options to keep your coverage going. It's important to act quickly to avoid any uninsured medical bills.