Losing job, seeking advice
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Losing job, seeking advice
Hello!
July 14 will be the last day for my DH at his company where he has worked for the past 15 years. The company is offering 20 weeks of severance pay PLUS 20 weeks of COBRA payment.
DH's current job involved extensive travel. So he wants to switch to a non travel role. So it may take longer to find a new job. I am SAHM.
We have two kids DS 17 and DD 15. We have 12 months of emergency expenses in savings that can be used after severance pay is used up.
My questions -
1. The current 401k contribution balance is 7500. The company allows up to 50% contribution from the paycheck towards 401k. Should we increase to 50% to get another 9000 contribution for the remaining two paychecks? Or leave that money available for monthly expenses until he finds the new job. We aren't eligible for Roth/Traditional IRA.
2. Are there any alternatives to COBRA? We were enrolled in HSA and plan to contribute the rest of the amount from the severance pay. Should we remain on COBRA or look for an alternative.
3. He has never experienced leaving a company like this. Any tips / suggestions on what he should do before he leaves his company.
Any help is greatly appreciated.
July 14 will be the last day for my DH at his company where he has worked for the past 15 years. The company is offering 20 weeks of severance pay PLUS 20 weeks of COBRA payment.
DH's current job involved extensive travel. So he wants to switch to a non travel role. So it may take longer to find a new job. I am SAHM.
We have two kids DS 17 and DD 15. We have 12 months of emergency expenses in savings that can be used after severance pay is used up.
My questions -
1. The current 401k contribution balance is 7500. The company allows up to 50% contribution from the paycheck towards 401k. Should we increase to 50% to get another 9000 contribution for the remaining two paychecks? Or leave that money available for monthly expenses until he finds the new job. We aren't eligible for Roth/Traditional IRA.
2. Are there any alternatives to COBRA? We were enrolled in HSA and plan to contribute the rest of the amount from the severance pay. Should we remain on COBRA or look for an alternative.
3. He has never experienced leaving a company like this. Any tips / suggestions on what he should do before he leaves his company.
Any help is greatly appreciated.
Re: Losing job, seeking advice
It is scary and unsettling to be losing a job since he has been at one place for so long. He may not realize all the opportunities out in the world that may be even better. US unemployment is very low by most standards and it may not be too difficult - depending on his field.
You are very smart to have one year's expenses in savings. This affords you more freedom to make decisions than a 3-6 month savings.
Assuming he is reasonably employable my suggestions are below.
1. What will be your tax bracket this year? If it is low, then tying up that much in 401k in uncertain times may not be the best thing as it may not save you much. Additionally if he finds a job soon, his potential employer may offer a 401(k) where he can contribute. However I am on the fence on this suggestion. In your shoes, I would put my money in 401(k) since I am in a field (IT) that has a great demand and I would be employed within two weeks. This is because I am a believer of "A bird in a hand..."
2. If they are paying for COBRA for 20 weeks, I would certainly stay on COBRA until then. I am assuming you are asking if you should stay on COBRA beyond that. You may be able to get coverage through ACA after that - but you will have to check on healthcare.gov site. Get a quote and compare to the COBRA prices against benefits.
3. I would certainly leave with a very positive attitude and make sure everyone knows that. It is important for people to think you are confident about yourself. Have 2-3 very good relationships (at least one senior person if possible) that will provide references for the next jobs and future jobs. In the exit interview if asked, provide some positives for the company and a few things that can be improved (with a suggestion on how to improve so it doesn't sound like a complain). Make a round and thank everyone - even the most junior person or the janitorial staff.
Just my 2 cents.
You are very smart to have one year's expenses in savings. This affords you more freedom to make decisions than a 3-6 month savings.
Assuming he is reasonably employable my suggestions are below.
1. What will be your tax bracket this year? If it is low, then tying up that much in 401k in uncertain times may not be the best thing as it may not save you much. Additionally if he finds a job soon, his potential employer may offer a 401(k) where he can contribute. However I am on the fence on this suggestion. In your shoes, I would put my money in 401(k) since I am in a field (IT) that has a great demand and I would be employed within two weeks. This is because I am a believer of "A bird in a hand..."
2. If they are paying for COBRA for 20 weeks, I would certainly stay on COBRA until then. I am assuming you are asking if you should stay on COBRA beyond that. You may be able to get coverage through ACA after that - but you will have to check on healthcare.gov site. Get a quote and compare to the COBRA prices against benefits.
3. I would certainly leave with a very positive attitude and make sure everyone knows that. It is important for people to think you are confident about yourself. Have 2-3 very good relationships (at least one senior person if possible) that will provide references for the next jobs and future jobs. In the exit interview if asked, provide some positives for the company and a few things that can be improved (with a suggestion on how to improve so it doesn't sound like a complain). Make a round and thank everyone - even the most junior person or the janitorial staff.
Just my 2 cents.
Re: Losing job, seeking advice
Yes, I'd stuff that 401k if it was me. Worst case, next year, still no job = low tax bracket. Low tax bracket, even with penalty could be the same or cheaper as taking the money now. At least the 401k was tax upside if it all works out.
Sorry to hear about it and hopefully you can find a way to manage any stress you may have. Anyway, the end result of this depends on what DH does for a living. If he's a software engineer, will probably have a job within a few weeks.
My dad lost his job after 30 years with the same company, very highly paid for what he does and working in a niche area for a niche field. He got a 12 month severance package. Took him 15 months to find a new job with much less money. He got in and proved himself and was quickly able to reach pay parity again after about a year. Ultimately during the process he was very upset, but in the scheme of things it worked out ok.
Sorry to hear about it and hopefully you can find a way to manage any stress you may have. Anyway, the end result of this depends on what DH does for a living. If he's a software engineer, will probably have a job within a few weeks.
My dad lost his job after 30 years with the same company, very highly paid for what he does and working in a niche area for a niche field. He got a 12 month severance package. Took him 15 months to find a new job with much less money. He got in and proved himself and was quickly able to reach pay parity again after about a year. Ultimately during the process he was very upset, but in the scheme of things it worked out ok.
Re: Losing job, seeking advice
^^ Have to agree with this. I was the most junior person at a lot of places where I served as an intern. The senior staff that took me under their wings during that time ultimately ended up being people I wanted to work with. Several of them from different places now work for me and I think they have it pretty good. On the other hand, folks who treated me like a waste of time were people I didn't want to work with later.Theseus wrote:Make a round and thank everyone - even the most junior person or the janitorial staff.
Re: Losing job, seeking advice
Sorry to hear that. Been there many times myself.
Regarding maximizing 401K, I would definitely consider it. Please also note that when you make a change to withholding for the 401K, they may need some lead-time before it takes effect. You should contact your payroll department and/or your 401K administrator to find out what the lead-time is because it might mean that the additional with-holding won't take effect until the second paycheck.
Because of frequent downsizing in my industry, which most often happens mid year or end year, I long ago changed my 401K withholding strategy. I now have it set to withhold the maximum amount possible (90% in my company's case) starting in January. Within a couple of months I will have put in the max IRS limits in order to "layoff proof" my 401K contributions. It does mean you have to have a buffer for living expenses during that time, but I found that it's worth it. In fact, I am also being layed off with my last day the end of this week.
One thing to consider with the strategy I use. I will be starting a new job in a couple of weeks. Like many companies, they will automatically sign me up for their 401K. I will need to go in and cancel that immediately since I've already maxed out for the year at my first job. Then come January, I will sign up again for maximum withholdings.
Cheers.
Regarding maximizing 401K, I would definitely consider it. Please also note that when you make a change to withholding for the 401K, they may need some lead-time before it takes effect. You should contact your payroll department and/or your 401K administrator to find out what the lead-time is because it might mean that the additional with-holding won't take effect until the second paycheck.
Because of frequent downsizing in my industry, which most often happens mid year or end year, I long ago changed my 401K withholding strategy. I now have it set to withhold the maximum amount possible (90% in my company's case) starting in January. Within a couple of months I will have put in the max IRS limits in order to "layoff proof" my 401K contributions. It does mean you have to have a buffer for living expenses during that time, but I found that it's worth it. In fact, I am also being layed off with my last day the end of this week.
One thing to consider with the strategy I use. I will be starting a new job in a couple of weeks. Like many companies, they will automatically sign me up for their 401K. I will need to go in and cancel that immediately since I've already maxed out for the year at my first job. Then come January, I will sign up again for maximum withholdings.
Cheers.
Re: Losing job, seeking advice
I'd do the opposite and collect as much cash as possible. Stop contributing to all retirement funds now. What if he never finds another job? This is easily possible, believe me.
Hope for the best, but plan for the worst.
You will hear challenges to this here, but that's because this site tends to attract more successful people. It's darn hard to get a job, especially a decent one. Many many jobs are as temporary contractors, especially at professional levels.
Hope for the best, but plan for the worst.
You will hear challenges to this here, but that's because this site tends to attract more successful people. It's darn hard to get a job, especially a decent one. Many many jobs are as temporary contractors, especially at professional levels.
Re: Losing job, seeking advice
luckybamboo,luckybamboo wrote:Hello!
July 14 will be the last day for my DH at his company where he has worked for the past 15 years. The company is offering 20 weeks of severance pay PLUS 20 weeks of COBRA payment.
DH's current job involved extensive travel. So he wants to switch to a non travel role. So it may take longer to find a new job. I am SAHM.
We have two kids DS 17 and DD 15. We have 12 months of emergency expenses in savings that can be used after severance pay is used up.
My questions -
1. The current 401k contribution balance is 7500. The company allows up to 50% contribution from the paycheck towards 401k. Should we increase to 50% to get another 9000 contribution for the remaining two paychecks? Or leave that money available for monthly expenses until he finds the new job. We aren't eligible for Roth/Traditional IRA.
2. Are there any alternatives to COBRA? We were enrolled in HSA and plan to contribute the rest of the amount from the severance pay. Should we remain on COBRA or look for an alternative.
3. He has never experienced leaving a company like this. Any tips / suggestions on what he should do before he leaves his company.
Any help is greatly appreciated.
1) Is the 20 weeks severance pay will be paid in one lump sum? Or, spread across 20 weeks?
2) Is he on the payroll for that 20 weeks? Can he contribute to 401K while receiving the severance pay?
3) If (2) is true, then, he may not be on COBRA for that 20 weeks.
4) Then, he has at least another 18 months of COBRA after that.
Please confirm the details.
KlangFool
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Re: Losing job, seeking advice
rgs92,rgs92 wrote:I'd do the opposite and collect as much cash as possible. Stop contributing to all retirement funds now. What if he never finds another job? This is easily possible, believe me.
That is a bad advice.
<<What if he never finds another job? This is easily possible, believe me.>>
Even if that is true and he needs to withdraw from the 401K and pay 10% penalty, he still saves tax. This is true for folks with pay high enough to disqualify direct Roth contribution.
How does paying more tax helps OP?
KlangFool
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Re: Losing job, seeking advice
My advice is to find an alternative job in the next few weeks. For a variety of reasons it is easier to find work while working. His next job does not need to be the dream job, it needs to be the one he is working at while finding the dream job. It might only be tangentially related but so long as it provides some learning opportunity and proof of a work ethic it won't be a negative to the future employer.
It is not easy to lose a job, particularly when you have been in an organization for 15 years. My advice might not work out in a few weeks, but the sooner the better. I didn't get such advice years ago, ran out of benefits, finally found something well below my abilities/education and 3 months later my dream job showed up. I believe that working at something related was a big part of that.
It is not easy to lose a job, particularly when you have been in an organization for 15 years. My advice might not work out in a few weeks, but the sooner the better. I didn't get such advice years ago, ran out of benefits, finally found something well below my abilities/education and 3 months later my dream job showed up. I believe that working at something related was a big part of that.
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Re: Losing job, seeking advice
That may be easier said than done, but I agree, he should at least be looking now. A buddy of mine in real estate got a cushy severance from his job during the Great Recession and took his time staying home with the kids while waiting for the industry to come back. He ended up unemployed for 3-4 years and even now is not really working full time. Don't use the severance as a vacation, use it as a cushion while you are actively searching for the next job.onthecusp wrote:My advice is to find an alternative job in the next few weeks. For a variety of reasons it is easier to find work while working.
That said, with a year in expenses plus 20 weeks severance, I would go ahead and max the 401k. Do you have any Roth or taxable brokerage investments beyond the emergency fund that can be tapped?
Re: Losing job, seeking advice
Another vote for max the 401(k), unless it is a field where a similar paying job will be tough to find.
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Re: Losing job, seeking advice
KlangFool wrote:luckybamboo,luckybamboo wrote:Hello!
July 14 will be the last day for my DH at his company where he has worked for the past 15 years. The company is offering 20 weeks of severance pay PLUS 20 weeks of COBRA payment.
DH's current job involved extensive travel. So he wants to switch to a non travel role. So it may take longer to find a new job. I am SAHM.
We have two kids DS 17 and DD 15. We have 12 months of emergency expenses in savings that can be used after severance pay is used up.
My questions -
1. The current 401k contribution balance is 7500. The company allows up to 50% contribution from the paycheck towards 401k. Should we increase to 50% to get another 9000 contribution for the remaining two paychecks? Or leave that money available for monthly expenses until he finds the new job. We aren't eligible for Roth/Traditional IRA.
2. Are there any alternatives to COBRA? We were enrolled in HSA and plan to contribute the rest of the amount from the severance pay. Should we remain on COBRA or look for an alternative.
3. He has never experienced leaving a company like this. Any tips / suggestions on what he should do before he leaves his company.
Any help is greatly appreciated.
1) Is the 20 weeks severance pay will be paid in one lump sum? Or, spread across 20 weeks?It will be paid in lump sum and the COBRA payments for 20 weeks will be another lumpsum.
2) Is he on the payroll for that 20 weeks? Can he contribute to 401K while receiving the severance pay?3) If (2) is true, then, he may not be on COBRA for that 20 weeks.No he cannot contribute to 401k after July 14
4) Then, he has at least another 18 months of COBRA after that.
Please confirm the details.
KlangFool
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Re: Losing job, seeking advice
That may be easier said than done, but I agree, he should at least be looking now. A buddy of mine in real estate got a cushy severance from his job during the Great Recession and took his time staying home with the kids while waiting for the industry to come back. He ended up unemployed for 3-4 years and even now is not really working full time. Don't use the severance as a vacation, use it as a cushion while you are actively searching for the next job.
That said, with a year in expenses plus 20 weeks severance, I would go ahead and max the 401k. Do you have any Roth or taxable brokerage investments beyond the emergency fund that can be tapped?He has started the job search aggressively. He is being mentored by a few executive level folks at the current company and the Company Alumnis. He is also exploring any sub-contracting opportunities he can find in the mean time.
Yes, if we add taxable brokerage investments then it will add another 6 months of expenses. But we wouldn't want to touch those as much as possible as that's for our retirement. We do not have many avenues of tax advantaged retirement savings, so taxable investments are for retirement.
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Re: Losing job, seeking advice
I'd suggest that you NOT put extra in the 401k, in fact you might consider stopping contributions altogether. If you find a new job in the next six months, then you can put your 401k contributions as high as you want to to use up the 2017 limits. If you are still out of work by the end of the year, then having that extra cash might be very useful.
Re: Losing job, seeking advice
Yes, max out the 401k if there is an alternative emergency source of cash that you could use if it takes a while for him to get a new job.
When working I always contributed almost my entire paycheck to the retirement accounts to max out as soon as possible, leaving less than $100 net to take care of normal fluctuations in deductions. That was beneficial when leaving a job during the year and also meant the money in tax-advantaged accounts went to work sooner which meant greater long-term returns.
Take the paid COBRA and then compare it to alternatives. Insurance is really a big unknown at this time and is the biggest financial issue for many people who rely on exchanges. Self-paid COBRA may be a good alternative. Usually you can have it for up to 18 months which could put you at the end of 2018. Usually the end of the year is the best time to change insurance because of annual deductibles that would reset if you switched mid-year, so take that into consideration in your planning. Since he is looking for a new job, hopefully this will not be so much of an issue as a new employer is likely to provide insurance.
When working I always contributed almost my entire paycheck to the retirement accounts to max out as soon as possible, leaving less than $100 net to take care of normal fluctuations in deductions. That was beneficial when leaving a job during the year and also meant the money in tax-advantaged accounts went to work sooner which meant greater long-term returns.
Take the paid COBRA and then compare it to alternatives. Insurance is really a big unknown at this time and is the biggest financial issue for many people who rely on exchanges. Self-paid COBRA may be a good alternative. Usually you can have it for up to 18 months which could put you at the end of 2018. Usually the end of the year is the best time to change insurance because of annual deductibles that would reset if you switched mid-year, so take that into consideration in your planning. Since he is looking for a new job, hopefully this will not be so much of an issue as a new employer is likely to provide insurance.
Re: Losing job, seeking advice
I volunteer to help folks "in transition" in finding work via networking, both face to face and social, e.g. LinkedIn, FaceBook or Twitter. Don't be shy tell his friends and family about his predicament. There is NO SHAME!. He needs to print up his own business cards so people could remember him. I use Vistaprint because they are cheap and usually you can get a coupon for first timer. In a hurry, try Staples.
Networking or going through the backdoor is his best shots, unless he is in a hot industry where the sellers call the shots. Sending resumes to the web, such as Indeed, Monster, Career Builder, etc. is a long shot, unless he is in IT (the odds are better than liberal arts or non-profit).
If he would like to change career, try https://eparachute.com/.
Our libraries have many free online courses to beef up his skills, as well as many others. Most are free, unless he wants to pay for a certificate for finishing a course.
BTW, if he is over 45, it would be a lot tougher. Age discrimination is a fact, not a myth, regardless of federal or local laws.
GL.
Networking or going through the backdoor is his best shots, unless he is in a hot industry where the sellers call the shots. Sending resumes to the web, such as Indeed, Monster, Career Builder, etc. is a long shot, unless he is in IT (the odds are better than liberal arts or non-profit).
If he would like to change career, try https://eparachute.com/.
Our libraries have many free online courses to beef up his skills, as well as many others. Most are free, unless he wants to pay for a certificate for finishing a course.
BTW, if he is over 45, it would be a lot tougher. Age discrimination is a fact, not a myth, regardless of federal or local laws.
GL.
Re: Losing job, seeking advice
I agree to have him begin looking immediately. The severance allows him to be choosy and not jump on the first thing that comes along, but get a jump on it.
JT
JT