Layoff coming in 3-6 months, questions about preparing

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Lynx310650
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Layoff coming in 3-6 months, questions about preparing

Post by Lynx310650 »

Brief background : We are DINKs in mid-to-late 30s. 3 months of expenses in liquid E-fund. I will be laid off sometime in the next 3-6 months. My company nor my direct supervisor has told me, but I have mentors/friends that are higher up in the org that have let me know that it's coming. The writing is on the wall. Most obvious thing I will be doing is looking for a new job, but my job/career field is such that it might take a while. And there's a chance I might need to do a complete career change or re-train.

My spouse's net pay is enough to just cover our monthly expenses, assuming continues to max out 401k. If we dial back, we have some more liquid cash as a buffer. My own pay has basically all been going to student loan repayment (done now) and lately just to savings. I also max out 401k.

My main question is our 401ks. Should we stop contributing (or dial back) and build up a bigger e-fund? I am not too concerned about our expenses because they are low, we don't have dependents, my spouse's work is pretty secure, we have family we can get assistance from, unemployment benefits, etc. We also have about another 6 months of expenses in a taxable investment account we could draw down as well if need be.

Any other advice/suggestions would be greatly appreciated as well.
Thegame14
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Thegame14 »

Obviously, sorry for your job situation, and get your resume out there ASAP, get on LinkedIn and start looking at all the job boards and applying for new jobs.

I would keep maxing out the 401k for 2018, but then if you are expecting to unemployed in 2019, you might want to consider putting some of your unemployment/taxable money into a ROTH, take the tax hit in the year, you are one income. Maybe also DW should dial back 401k in 2019 and also max out a ROTH for her as well while your income is down for the year, and then when you start working again, go back to 401K maxing....
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SmileyFace
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Re: Layoff coming in 3-6 months, questions about preparing

Post by SmileyFace »

If your wife can cover all expenses and assure 401K why would you dial back? Personally - if I were you - I would INCREASE 401K as you go into the new year to try to get as much in for you personally before you get laid off (and then can't contribute).
Sounds like you are in good shape to me.
Do you know if your company will pay severance? What does that look like?

I would start looking for a job now - you might be able to land one at Lay-off time and then collect two salaries (if your company pays severance).

Sorry to hear about the upcoming job loss.
Olemiss540
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Olemiss540 »

I would max 401ks if at all possible. You can live on one income and have a taxable buffer as well as an efund.

No brainer to get as much into retirement accounts as possible in this scenario I would think.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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SmileyFace
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Re: Layoff coming in 3-6 months, questions about preparing

Post by SmileyFace »

For sake of comparison - I got laid off once - when I was younger and foolish (and not a Boglehead). I was supporting a stay-at-home-Mom and two kids and had no emergency fund. It was also a start-up that ran out of money so there was $0 severance. I only mention this to explain why my answer above may have seemed overly optimistic.
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Lynx310650
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Lynx310650 »

DaftInvestor wrote: Tue Dec 11, 2018 3:07 pm If your wife can cover all expenses and assure 401K why would you dial back? Personally - if I were you - I would INCREASE 401K as you go into the new year to try to get as much in for you personally before you get laid off (and then can't contribute).
Sounds like you are in good shape to me.
Do you know if your company will pay severance? What does that look like?

I would start looking for a job now - you might be able to land one at Lay-off time and then collect two salaries (if your company pays severance).

Sorry to hear about the upcoming job loss.
Thank you!

Severance is generally tied to years of service, so I think I will get roughly 1 month of pay. And accrued vacation paid out should get me about another 1 month of pay.

And of course unemployment benefits would come after that if I haven't found a job. So I'm not stressing too much, I think for at least 2019 we should be fine, although of course I want to find a new job ASAP
KlangFool
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Re: Layoff coming in 3-6 months, questions about preparing

Post by KlangFool »

OP,

Do you contribute to Roth IRAs? If you do, why do you need to use 401K as your second tier emergency fund?

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CaliJim
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Re: Layoff coming in 3-6 months, questions about preparing

Post by CaliJim »

Lynx310650 wrote: Tue Dec 11, 2018 3:00 pm Brief background : We are DINKs in mid-to-late 30s. 3 months of expenses in liquid E-fund. I will be laid off sometime in the next 3-6 months. My company nor my direct supervisor has told me, but I have mentors/friends that are higher up in the org that have let me know that it's coming. The writing is on the wall. Most obvious thing I will be doing is looking for a new job, but my job/career field is such that it might take a while. And there's a chance I might need to do a complete career change or re-train.

My spouse's net pay is enough to just cover our monthly expenses, assuming continues to max out 401k. If we dial back, we have some more liquid cash as a buffer. My own pay has basically all been going to student loan repayment (done now) and lately just to savings. I also max out 401k.

My main question is our 401ks. Should we stop contributing (or dial back) and build up a bigger e-fund? I am not too concerned about our expenses because they are low, we don't have dependents, my spouse's work is pretty secure, we have family we can get assistance from, unemployment benefits, etc. We also have about another 6 months of expenses in a taxable investment account we could draw down as well if need be.

Any other advice/suggestions would be greatly appreciated as well.
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JBTX
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Re: Layoff coming in 3-6 months, questions about preparing

Post by JBTX »

Lynx310650 wrote: Tue Dec 11, 2018 3:28 pm
DaftInvestor wrote: Tue Dec 11, 2018 3:07 pm If your wife can cover all expenses and assure 401K why would you dial back? Personally - if I were you - I would INCREASE 401K as you go into the new year to try to get as much in for you personally before you get laid off (and then can't contribute).
Sounds like you are in good shape to me.
Do you know if your company will pay severance? What does that look like?

I would start looking for a job now - you might be able to land one at Lay-off time and then collect two salaries (if your company pays severance).

Sorry to hear about the upcoming job loss.
Thank you!

Severance is generally tied to years of service, so I think I will get roughly 1 month of pay. And accrued vacation paid out should get me about another 1 month of pay.

And of course unemployment benefits would come after that if I haven't found a job. So I'm not stressing too much, I think for at least 2019 we should be fine, although of course I want to find a new job ASAP
Depending on the type and structure of the severance, you may be eligible for the unemployment comp as soon as your unemployment starts. That is a mistake I may have made decades ago. But I don't recall the criteria of when you can or can't, or if it may be state specific.

https://www.thebalancecareers.com/how-d ... nt-2064190

As long as you think you will have enough to live on, I'd keep funding the 401k. Also, to the extent you fund Roth IRA's, you can always take out the contributions in a worse case scenario.
KlangFool
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Re: Layoff coming in 3-6 months, questions about preparing

Post by KlangFool »

OP,

I had been facing annual and quarterly laid from my employers over the last 10+ years. I was unemployed for more than 1 year a few times.

This is what I do. Which may or may not apply to you.

1) Get my annual physical done.

2) Get all major surgeries and dental work done.

3) Work out whether I can survive if I am unemployed:

A) 3 months

B) 6 months

C) 12 months

D) 24 months

4) What can I cut in term of expenses if I am unemployed for 3 months, 6 months, 12 months, 24 months?

5) Start a regular exercise plan in order to deal with the stress. I cycled or walked daily.

6) What are you willing to settle for in term of pay if you are unemployed for 3 months, 6 months, 12 months, or 24 months?

7) What happened if we hit a recession and the stock market drop 50% while you are unemployed?

In summary, I worked out the worse case plan before I am unemployed. Then, I know I am prepared in any case.

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JediMisty
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Re: Layoff coming in 3-6 months, questions about preparing

Post by JediMisty »

Lynx310650 wrote: Tue Dec 11, 2018 3:00 pm Brief background : We are DINKs in mid-to-late 30s. 3 months of expenses in liquid E-fund. I will be laid off sometime in the next 3-6 months. My company nor my direct supervisor has told me, but I have mentors/friends that are higher up in the org that have let me know that it's coming. The writing is on the wall. Most obvious thing I will be doing is looking for a new job, but my job/career field is such that it might take a while. And there's a chance I might need to do a complete career change or re-train.

My spouse's net pay is enough to just cover our monthly expenses, assuming continues to max out 401k. If we dial back, we have some more liquid cash as a buffer. My own pay has basically all been going to student loan repayment (done now) and lately just to savings. I also max out 401k.

My main question is our 401ks. Should we stop contributing (or dial back) and build up a bigger e-fund? I am not too concerned about our expenses because they are low, we don't have dependents, my spouse's work is pretty secure, we have family we can get assistance from, unemployment benefits, etc. We also have about another 6 months of expenses in a taxable investment account we could draw down as well if need be.

Any other advice/suggestions would be greatly appreciated as well.
My megacorp employer is contracted by a Federal agency for my services. We have watched the contract dwindle from 142 employees locally over the years down to 35. I've survived RIFs several times. So, speaking from experience, klangfool made great points. I expect a layoff in March or July. In 2019 I am maxing out my 401k to save on taxes earliest that I can get $$ contributed. Also, I once found a low fee refinance for my mortgage. I keep a car for a while to avoid payments. Save up to buy the next one in cash. That said, I've gone on vacation expecting layoff every few years. So I don't stop living altogether. I've taken less than ideal positions to stay employed, as I didn't want to have to relocate. In my case, my former husband lives nearby and we amicably shared parenting. Consider relocating or other flexible alternatives. You're young enough to start over in another city. And the exercise thing is crucial Best of luck!
mouses
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Re: Layoff coming in 3-6 months, questions about preparing

Post by mouses »

Lynx310650 wrote: Tue Dec 11, 2018 3:28 pm

And of course unemployment benefits would come after that if I haven't found a job.
Unemployment benefits may start right away. I got laid off a bunch of times and it always did in my case.
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Re: Layoff coming in 3-6 months, questions about preparing

Post by jabberwockOG »

Dial back 401K contributions from max out to just enough to capture employer matching and build e-fund with extra funds instead until you better understand your prospects and timeline for re-employment. You should have minimum of 9-12 months expenses in the bank by layoff time. In the meantime cut out any discretionary and unnecessary expenses. Look very hard at monthly outlays, especially recurring ones - there is always room to make substantial cuts to monthly expenses and live more frugally with minimal impact on daily life.
Cleverusername
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Cleverusername »

Max out tax deferred savings
Apply for unemployment benefits when the time comes
Make a disciplined daily routine of networking and applying for jobs. Have multiple resumes
Get daily exercise to get in shape and fight off depression
Bulk buy food
Set dates to get out of the house and enjoy life
You will work again and see the sun shine again
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Re: Layoff coming in 3-6 months, questions about preparing

Post by RickBoglehead »

Lynx310650 wrote: Tue Dec 11, 2018 3:28 pm
DaftInvestor wrote: Tue Dec 11, 2018 3:07 pm If your wife can cover all expenses and assure 401K why would you dial back? Personally - if I were you - I would INCREASE 401K as you go into the new year to try to get as much in for you personally before you get laid off (and then can't contribute).
Sounds like you are in good shape to me.
Do you know if your company will pay severance? What does that look like?

I would start looking for a job now - you might be able to land one at Lay-off time and then collect two salaries (if your company pays severance).

Sorry to hear about the upcoming job loss.
Thank you!

Severance is generally tied to years of service, so I think I will get roughly 1 month of pay. And accrued vacation paid out should get me about another 1 month of pay.

And of course unemployment benefits would come after that if I haven't found a job. So I'm not stressing too much, I think for at least 2019 we should be fine, although of course I want to find a new job ASAP
Common misconception. File for unemployment IMMEDIATELY. Let them decide when your benefits start. Rules are state-specific.
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Re: Layoff coming in 3-6 months, questions about preparing

Post by LadyGeek »

Does your health plan include a Flexible spending arrangement?

Max out your medical expenses as soon as you can. You are entitled to expense the full amount of your election, regardless if you've funded the account. When you get laid off, you will not pay for any balances due.

Conversely, don't leave any money on the table, as it will be forfeited when you leave.
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johnny
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Re: Layoff coming in 3-6 months, questions about preparing

Post by johnny »

Sorry to hear about your situation. Many people experience something like this over the course of a career, so don't lose heart. It could very well be the best thing for you to get into a better situation.

I learned from my layoff that layoffs are better than quitting. I managed to retain a prorated cut of some stock awards, just for sticking it out till the last day. Use severence and unemployment if you can. In NY there's a 1 week waiting period before unemployment starts paying. Retraining funds may be available as well. One guy I know learned welding. Another took Amazon Web Services training on the government's dime.

Also, it's good you have taxable savings. I always thought I'd be able to borrow from my 401k in a pinch, but that feature goes away when you're no longer employed by the company.
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Luke Duke »

Lynx310650 wrote: Tue Dec 11, 2018 3:00 pm Brief background : We are DINKs in mid-to-late 30s. 3 months of expenses in liquid E-fund. I will be laid off sometime in the next 3-6 months. My company nor my direct supervisor has told me, but I have mentors/friends that are higher up in the org that have let me know that it's coming. The writing is on the wall. Most obvious thing I will be doing is looking for a new job, but my job/career field is such that it might take a while. And there's a chance I might need to do a complete career change or re-train.

My spouse's net pay is enough to just cover our monthly expenses, assuming continues to max out 401k. If we dial back, we have some more liquid cash as a buffer. My own pay has basically all been going to student loan repayment (done now) and lately just to savings. I also max out 401k.

My main question is our 401ks. Should we stop contributing (or dial back) and build up a bigger e-fund? I am not too concerned about our expenses because they are low, we don't have dependents, my spouse's work is pretty secure, we have family we can get assistance from, unemployment benefits, etc. We also have about another 6 months of expenses in a taxable investment account we could draw down as well if need be.

Any other advice/suggestions would be greatly appreciated as well.
Get resume and LinkedIn profile updated immediately. Start applying for jobs. Decide if trying to move within your company would lessen your odds of getting laid off. If yes, decide if it's worth pursuing. If you can truly live on wife's income while still maxing out one 401k, then I would either max yours out as early in the year as possible or contribute enough to get the match and max out Roths for you and your wife.
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Re: Layoff coming in 3-6 months, questions about preparing

Post by gclancer »

RickBoglehead wrote: Tue Dec 11, 2018 8:24 pm Common misconception. File for unemployment IMMEDIATELY. Let them decide when your benefits start. Rules are state-specific.
+1 - always file for unemployment immediately.
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Re: Layoff coming in 3-6 months, questions about preparing

Post by CyclingDuo »

Lynx310650 wrote: Tue Dec 11, 2018 3:00 pm Brief background : We are DINKs in mid-to-late 30s. 3 months of expenses in liquid E-fund. I will be laid off sometime in the next 3-6 months. My company nor my direct supervisor has told me, but I have mentors/friends that are higher up in the org that have let me know that it's coming. The writing is on the wall. Most obvious thing I will be doing is looking for a new job, but my job/career field is such that it might take a while. And there's a chance I might need to do a complete career change or re-train.

My spouse's net pay is enough to just cover our monthly expenses, assuming continues to max out 401k. If we dial back, we have some more liquid cash as a buffer. My own pay has basically all been going to student loan repayment (done now) and lately just to savings. I also max out 401k.

My main question is our 401ks. Should we stop contributing (or dial back) and build up a bigger e-fund? I am not too concerned about our expenses because they are low, we don't have dependents, my spouse's work is pretty secure, we have family we can get assistance from, unemployment benefits, etc. We also have about another 6 months of expenses in a taxable investment account we could draw down as well if need be.

Any other advice/suggestions would be greatly appreciated as well.
Make sure you file for unemployment the day after your last day on your current job. The window to file is very short - so don't miss it. Unemployment will require you to apply for jobs on a weekly basis to receive benefits, so take that part seriously as you will be required to keep all records of where you are applying. I got my layoff news in Q1 of this year, last day on the job was in mid Q2 (last paycheck was in mid Q3 - so I was able to max out my 403b by then for 2018). Was on unemployment for 3 months before new employment emerged in Q3, so the transition - though an emotional gut wrench - took a full 6 months from start to finish.

Brush up your resume and your LinkedIn profile ASAP. Start looking now as the job market is in your favor at the moment even if you have to take a job in an unrelated industry to what you are currently doing.

Obviously, you will finish out 2018 with the 401k max which is good as it may be a bit of time before you are able to do that again. You might want to keep contributions going in early 2019 until the rug is pulled out with the layoff to get some pre-tax socked away for the same reason.

Cut back on all of the "wants" in terms of your expenses right now and pare everything down to just your basic needs. Save the rest in your emergency fund. Cook all meals at home. Pack your lunch. Get by with what you have until the transition is complete. In short, hunker down with your expenses and lifestyle now in preparation for what sounds like is coming to see if you can get by on less without having to tap any of your funds.

Best of luck working through it all.
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Lynx310650
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Re: Layoff coming in 3-6 months, questions about preparing

Post by Lynx310650 »

A heartfelt thank you to everyone for your advice!
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